The appreciation of the real face of the dollar and the successive falls in food prices made the Institute of Applied Economic Research (IPEA) to review down the projection of inflation to 2025. The estimate went from 5.2% to 4.8%.
The forecast refers to the so -called official inflation, measured by the National Consumer Price Index (IPCA), of the Brazilian Institute of Geography and Statistics (IBGE).
In August, the IPCA marked deflation of 0.11%and an accumulated high (inflation) of 5.13% in 12 months.
The Inflation target pursued by the Central Bank is 3% per year, with tolerance of 1.5 percentage (PP) point (PP) for more or less – ─ ie 4.5% at most.
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Factors
According to the researchers of Ipea Maria Andréia Parente Lameiras and Tarsylla da Silva de Godoy Oliveira, authors of Conjuncture letter, “The Brazilian inflationary environment has signs of greater moderation, although it follows challenging.”
IBGE showed that food prices fell in August for the third month in a row. Thus, Ipea revised the expectation of this group to the end of the year, from an inflation of 6.7% to a 4.4%.
One reason for the retreat in prices in recent months is the expansion of supply, with a forecast of record crop.
The researchers point out, however, that a more important explanation is that Exchange appreciation – devaluation of the dollar before the real – reduced pressures on food, industrial goods and fuels. In the last quarter, the authors cite, Real valued about 5%.
Because of the heated labor market, Ipea did not reduce inflation projection compared to service prices, maintained by 6.2%. “Even in the light of a slight slowdown in economic activity on the margin, the job market is very tight,” the authors say.
The IBGE announced on Tuesday (30) that the vacancy rate in the quarter ended in August was 5.6%the lowest in the historical series, which began in 2012.
Convergence
Ipea is a body linked to the Ministry of Planning and Budget and operates in the preparation of analysis for public policy formulation. The projection review of the IPCA follows Central Bank (BC) evaluation, which announced last Thursday (25) review from 4.9% to 4.8%.
Ipea and BC projections approach the financial market, which expects inflation of 4.81%, according to the Focus Bulletin, BC survey with financial institutions, released on Monday (29).
High interest
Researchers point out that the process of reducing inflation in Brazil advances, “but still very gradually and with high cost in terms of monetary policy.”
Monetary policy is the central bank’s use of the basic interest rate, Selic, which has been 15% per year since June 2025. It is the highest level since July 2006 (15.25%).
>> Copom Minutes indicates Selic to 15% “for a very prolonged period”
One face of high interest rate is the contractionist effect, which fights inflation. Raising the rate causes loans to be more expensive – whether for individuals or companies – and discourages investments, as it can be more worth keeping the money invested, yielding in high interest rate than risking productive activities. This set of effects brakes the economy.
Minor lace
Ipea also reduced the estimate for the National Consumer Price Index (INPC), from 4.9% to 4.5%. Also calculated by IBGE, INPC measures the cost of living of families with income of one to five minimum wages. One of the differences for the IPCA is that INPC attributes more weight to spending such as food.
Used to correct salaries of some categories and also in the annual minimum wage adjustment formula, The August INPC accumulates 5.05%.
