Inflation reached peak in September: Brazil’s Central Bank head

The increase in the inflation must have reached its highest point in September, said Brazil’s Central Bank President Roberto Campos Neto. “We understand that, in terms of 12-month inflation, September must be the peak. We still have high inflation in September,” he said at a talk delivered at the São Paulo Trade Association.

The National Broad Consumer Price Index 15, or IPCA-15, which makes a previous estimate of Brazil’s official inflation, reached 1.14 percent in September. The rate is above the 0.89 percent result in August and 0.45 percent in September last year. With the result, the estimate for the official inflation accumulates rates of 7.02 percent a year and 10.05 percent for 12 months. The center of the target of the inflation set by the National Monetary Council for this year is 3,75 percent, with a tolerance interval of 1.5 percentage points up or down.

Campos attributed the hike to “two shocks,” reported in 2020 and 2021. According to president of the financial institution, last year Brazil suffered from a significant increase in food prices couples with major losses in the value of the real against the dollar.

This year, the inflation is reported to be pulled by the increase in energy prices. Gasoline, the bank’s president pointed out, is still on the rise, despite its near stability internationally, due to the hike in ethanol, which is part of the composition sold to Brazil, and the increase in freight costs. “Ethanol went up over 40 percent a year, and shipping rose too,” he said.

International landscape

Inflation in energy is, Campos went on to argue, an international phenomenon, which, in economically developed nations, takes place for different reasons. “On the one hand I have more demand for goods, which generate more demand for energy. On the other, I have, generally speaking, countries willing to produce less energy, or cleaner energy, interrupting the production of some sources of energy that are not so clean. The combination of these factors is generating great inflation in some countries and a few energetic problems,” he explained.

Thus, said the Central Bank president, the generalized price hike has sparked concern worldwide. “Inflation has given a relevant scare in nearly all countries—both inflation for the producer and inflation for the consumer,” he added.

Also relevant in Brazil is the increase in prices being introduced by the services sector, which has adjusted values charged from consumers to the new costs involved with the inflation from other sectors. “The increase that had been held back is starting to pour in,” he noted.

Interest

To curb the pressure, Campos said that the Central Bank has worked quickly and readjusted interest in order to keep the inflation in check. “We understand that there’s an element of higher persistence [of the inflation], that’s why we’ve been insistent with the interest,” he said.

On September 22, the Monetary Policy Committee (Copom) rose the Selix rate—Brazil’s benchmark interest rate—from 5.25 to 6.25 percent a year. The rate is at the highest level since July 2019, when it was 6.5 percent a year. This is the fifth consecutive time the Selic is readjusted.