The drop in electricity bills and the dollar are the main factors that have been pushing inflation down. The worsening of the economic recession, however, should only have an effect on price indexes from the second half of the year, according to economists interviewed by Agência Brasil. Experts maintain their forecast that, despite the decline, inflation will close 2016 above the target center for the second year in a row. Yesterday (8), the Brazilian Institute of Geography and Statistics (IBGE) announced that official inflation measured by the Broad National Consumer Price Index (IPCA) closed March at 0,43%, the lowest rate for the month since 2012.
In the 12-month period, the index is at 9,39%, below double digits for the first time since October. According to experts, the drop in inflation was already expected, after the index reached a peak of 10,71% in the 12 months ending in January. “The main factor is the end of the impact of price increases in fuel and energy. This is because regulated prices account for a quarter of official price indexes,” explains economist André Braz, responsible for the Weekly Consumer Price Index (IPC-S) at the Getulio Vargas Foundation (FGV). According to Braz, the fall in the dollar also affects inflation, but to a lesser extent.
The worsening of the recession, however, has not yet had an effect on the indexes. “The prices of durable goods have not yet started to fall. The prices of free services have stopped accelerating, but are still rising. Only when these prices start to fall to attract consumers can we say that the recession contributes to the fall in inflation,” he says. Above the target For the FGV economist, only from June onwards are there chances that the retraction in economic activity will help to reduce inflation. With the change in the flag on the energy bill, Braz estimates a reduction from 7,4% to 7,2% in the inflation expectation according to the IPCA for this year.
The estimate is slightly more optimistic than that of financial institutions, which project an official inflation rate of 7,28% in 2016, according to the Boletim Focus, a weekly survey released by the Central Bank. Marcos Sarmento Melo, a finance professor at Ibmec in the Federal District, says that it is still difficult to pinpoint a percentage of the official inflation rate that will close the year. However, he advises consumers not to be fooled by the drop in prices. “Even with the recession and the drop in the dollar acting to contain inflation, this process will only start to be felt in the coming months. The fact is that inflation is still high and has a good chance of closing above the target ceiling [of 6,5%],” he warns. For Melo, there is a possibility that the drop in the dollar, which fell 10,2% in March and 0,15% in April, will be only temporary. “If the US Central Bank raises interest rates and China continues to slow down, the exchange rate will be pressured upwards again.
The effects of the political crisis on the dollar are already priced in [incorporated into expectations], and the external environment is not favorable,” he warns. Consumers feel little impact Despite the drop in inflation, consumers still feel little difference in their pockets. “The prices of some foods have fallen, but they are still higher than last year. I noticed a reduction in the value of my electricity bill, but nothing significant,” says civil servant George Wellington Gouvea, 57.
Even with the recent reduction in food prices, the food and beverage subgroup has accumulated a 13,27% increase in 12 months, according to the IBGE. For those who have seen their budget shrink in recent months, inflation continues to erode purchasing power. “Prices have only increased, and my electricity bill, for me, has remained the same,” says unemployed Fábio Rubens, 35. Retired Creuza Medeiro Gomes, 68, has not yet noticed a drop in food prices. “It is still difficult to fill the pantry. There are people going hungry. My electricity bill has not gone down yet,” she says.
Exam – 09/04/2016
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