Inflation threat grows – Opinion

Inflation threat grows – Opinion
Inflation threat grows – Opinion
Strong warning signs continue to emerge on the inflation front, while the economy moves slowly, tens of millions await emergency aid and political tensions multiply. The expensive dollar continues to fuel the rise in prices, while the exchange rate reflects, in its instability, the insecurity of the market in the face of economic policy, still stuck, and the future of public accounts. The wholesale increases only partially contaminate the retail, but the price hikes in the countryside, in the cooperatives and in the industries is a growing threat of problems for the consumer already much sacrificed. In Brasilia, the president remains distant from this world, while the economic team stumbles into the trappings of the Centrão.

Inflation picked up speed in March, according to the Getúlio Vargas Foundation (FGV). Its General Price Index – Market (IGP-M) rose 2.94% in the month, accumulating an increase of 8.26% in the year and 31.10% in 12 months. The monthly variation had been 2.53% in February. There was an acceleration in the three major components of the indicator. Producer prices increased by 3.56%, while consumer prices rose by 0.98% and construction costs varied by 2%. In 12 months, producer prices soared by 42.57%, while the consumer’s shopping basket increased by 5.74%. The family squeeze explains, to a large extent, the limitation of the transfer of increases to final buyers.

The surge in prices at the beginning of the chain is also clearly shown by the Brazilian Institute of Geography and Statistics (IBGE). Industry inflation reached 5.2% in February, with the highest monthly variation in the series started in 2014. The rate of January, 3.55%, had already been a record. Records are also high in the year (8.95%) and in 12 months (28.58%). This index reflects the variation in prices collected at the factory door, without freight and without taxes.

The monthly result was mainly determined by the increases observed in the extractive industries (27.91%), in the refining of petroleum and alcohol products (12.12%) and in those of other chemical products (9.69%). There were price increases in 23 of the 24 industrial activities covered by the survey.

This picture reflects, in the first place, the increase in international prices for basic products, such as iron ore and oil. But these prices have also been affected, in the domestic market, by exchange rate fluctuations. In the 12 months to February, the dollar increased 25%, said coach Felipe Figueiredo Câmara.

Despite the limited pass-through, the increases also appear in retail, as can be seen in the indicators produced by the various research institutions. The IPCA-15, a preview of official inflation, rose 0.93% in March, with a strong acceleration in relation to the previous month, when the variation reached 0.48%. The March high was the highest for the month since 2015, when it reached 1.24%. The final result for the month should come out on April 9, with the release of the Broad Consumer Price Index (IPCA).

With an accumulated 5.52% increase in 12 months, the IPCA-15 has already exceeded the upper limit (5.25%) set for official inflation for the year 2021. The Central Bank (BC) has started to act. It raised the basic interest rate from 2% to 2.75%, about two weeks ago, and is expected to decide a further increase, to 3.50%, at the next meeting of its Monetary Policy Committee (Copom), in May.

Higher interest rates will raise the cost of financing the Treasury, making it harder to settle accounts and contain the increase in public debt. In addition, the most expensive credit could hinder the recovery of the economy and employment. But faster inflation could create even more serious problems for the government and families.

Faced with the inflationary surge, the BC does its job. The President of the Republic could make a contribution, leaving aside his personal goals, taking care of matters of national interest, causing less conflict and providing a little more tranquility to the market. With a more accommodating dollar, inflation would be less pressured.

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