Brazil Central Bank: commodities pressure inflation in 2022
The increase in commodity prices (primary goods with international price quotation), the bottlenecks in the global production chains, and the inertia of adjustments from the previous year were the main reasons for pressuring the prices in 2022.
The information is stated in a letter sent by Brazil`s Central Bank head Roberto Campos Neto to the Minister of Finance, Fernando Haddad, to justify the breach of the inflation target last year, set at 3.5 percent, with a tolerance margin of 1.5 percent up or down.
Brazil`s monetary authority predicts that official inflation based on the National Broad Consumer Price Index (IPCA) - the nation’s official gauge for the inflation - will fall from 5.79 percent in 2022 to 5 percent in 2023. Even so, it will remain above the target for this year, set at 3.25 percent, and could reach 4.75 percent, because of the tolerance margin of 1.5 percentage points, the document reads.
"Inflation still remains above the target, mainly due to the assumption of the return of federal fuel taxation this year and the inertial effects of inflation in 2022," Campos Neto wrote in the letter. Inflation inertia corresponds to adjustments tied to prices corrected by the previous year's inflation, such as rents.
Inflation will only be within the target in 2024, when it should be 3 percent, and in 2025 (2.8%). For these two years, the National Monetary Council establishes a target of 3 percent for the IPCA, with a tolerance margin of 1.5 percentage points, Central Bank`s head Campos Neto explained.
Obligation
According to the legislation in force since the end of the 1990s, the Central Bank`s head must send a letter to the Finance Minister justifying non-compliance with the inflation targets set by the Monetary Council. This was the seventh time this has occurred.
In 2003, 2004, 2005, 2017, and 2022, the Central Bank sent letters because the IPCA of the previous years had exceeded the target ceiling. In 2018, the monetary authority sent a letter because inflation had fallen below the floor.
