Wednesday, March 29, 2023

Brazilian interannual inflation falls to 5.60%, its lowest level in two years

Brazil’s interannual inflation stood at 5.60% in February, its lowest level in the last two years, despite a new rise in prices last month (0.84%), the Government reported this Friday.

The rate of increase in prices accumulated in twelve months was not so low since February 2021 (5.20%) and has been falling gradually from the 12.13% that it registered in April of last year, which was then the highest in twelve years. according to data released by the Brazilian Institute of Geography and Statistics (IBGE).

Year-on-year inflation ended 2022 at 5.79% and in January it dropped to 5.77% and now in February to 5.60%.

The accumulated rate in the first two months of 2023 was 1.37%, below that of the first two months of 2021 (1.56%).

Despite this improvement, inflation in February was 0.84%, the highest for a month since April of last year (1.06%) and more than 0.3 percentage points higher than that of December (0.53%).

The February rate was pressured by the increase in prices in the education sector which, at the very beginning of the school year, was 6.28%, its highest increase for a month since February 2004 (6.70%). This increase had a weight of 0.35 percentage points in inflation for the month, more than a third of the rate.

“February is always a very marked month for education, since the readjustments made by educational establishments at the end of the school year are counted in this month. Normally this readjustment is equivalent to that of the inflation of the previous year and that is why it was so high”, explained the person in charge of the IBGE inflation studies, the economist Pedro Kislanov.

Of the nine groups analyzed by IBGE, eight had price increases in February. The only exception was clothing, whose prices were reduced by 0.24%.

Food prices, the ones that weigh the most in the index, increased by 0.16% in February; those of the transport sector 0.37% and those of housing 0.82%.

In an attempt to control inflation, the Central Bank has been raising interest rates that are at 13.75% per year, its highest level since 2016.

The forecast of market economists is that inflation will rise slightly from 5.79% in 2022 to 5.90% in 2023, making it difficult to reduce the cost of money, which is being pressured by the government of President Luiz Inácio Lula da Silva .

The progressive leader has criticized the rigidity of the Issuer’s monetary policy and has expressed his concern about the effect that high interest rates may have on the growth of the Brazilian economy this year, when an expansion of 0.84% ​​is expected, well below below the 2.9% reached in 2023.


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