For the second consecutive year, inflation will burst the target ceiling, acknowledged today (30) the Central Bank (BC). The information is contained in the Inflation Report for the second quarter, released today (30).
According to the BC, the chance that official inflation by the Broad National Consumer Price Index (IPCA) will exceed the target ceiling in 2022 rose from 88% in March to 100% in June. For 2023, the probability of the IPCA exceeding the target ceiling rose from 12% to 25%.
The inflation target is set by the National Monetary Council (CMN). For 2022, the target for the IPCA is 3.5%, with a tolerance interval of 1.5 percentage points. Thus, inflation could be between 2% and 5% this year. The report estimates that the IPCA will reach 8.8% in 2022.
For 2023, the CMN set a target of 3.25% for the IPCA, also with a 1.5 percentage point tolerance. In this way, the index will be able to close the next year between 1.75% and 4.75%. The BC projects that official inflation will be 4% in 2023 and 2.7% in 2024.
Explanatory letter
When the IPCA exceeds the target ceiling or falls below the floor, the BC is obliged to write a public letter, explaining the reasons. The agency did so at the beginning of the year, after the 2021 IPCA reached 10.06%, the highest since 2015 and well above the 5.25% ceiling for last year.
On the occasion, the president of BC, Roberto Campos Neto, assigned the goal ceiling overflow the lack of inputs resulting from the covid-19 pandemic, the rise in commodities (primary goods with international prices) and the water crisis that raised electricity bills in 2021.
The main way for the Central Bank to control inflation is through the Selic rate (basic interest rates in the economy), defined every 45 days by the Monetary Policy Committee (Copom). According to the minutes of the last Copom meeting, which set the Selic rate at 13.25% per year, the body is aiming to meet the target in 2023, and interest rates may remain high for longer than expected.
Other projections
Although the Inflation Report was officially released today, the main figures had been released last week. The release of the document was delayed because of the BC civil servants strike.
According to projections released on the 23rd, the Central Bank projects that the Gross Domestic Product (GDP, the sum of the wealth produced in the country) will grow 1.7% in 2022, against a previous forecast of 1% in the March report. The trade balance surplus projection rose from US$ 83 billion to US$ 86 billion. The volume of bank credit will grow 11.9%, against a previous forecast of 8.9%, and the estimated surplus of external accounts dropped from US$ 5 billion to US$ 4 billion.
