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Inflation in Brazil is the 3rd highest among the world’s major economies

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THE Brazilian inflation in 2021, measured by the IPCA (Broad Consumer Price Index), is expected to be the third highest among the world’s major economies, behind only Argentina and Turkey, according to a survey by chief economist Andrea Damico, of Armor Capital , with data from the CEIC Data platform.

The IPCA was in double digits in 2021, with up 10.06%, the biggest increase since 2015 (10.67%), and was well above the ceiling of the inflation target (5.25%) the center was 3.75%. The deviation from the upper range of the objective to be pursued by the Central Bank was the widest for nearly 20 years, since, in 2002, the “jump” was more than 7 percentage points.

Some countries have yet to release data for December and those closed for 2021. In them, the survey considered the 12-month rate up to November last year. This is the case in Argentina, where consumer inflation hit 51.2% in the 12 months to November.

In Turkey, the index jumped 36.08% from January to December, a 20-year high, amid President Recep Tayyip Erdogan’s intervention at the country’s Central Bank, with pressure to cut interest rates. ‘interest.

The Chinese index accumulated 1.50% last year. The US economy, on the other hand, saw its largest price increase since June 1982 (7%), also exceeding the 2% target. Survey leader Andrea Damico acknowledges the global nature of rising prices, with rising raw materials (commodities such as food, oil and ore) and wholesale cost shock, in partly explained by supply chain issues, spread though through retail.

Damico argues that the signs of trouble appeared earlier in Brazil. While wholesale prices began to climb around the world in 2021, in the country, the jump was already clear in the second half of 2020, boosted by the atypical rise in the dollar and commodities.

Bradesco economists say consumer inflation is expected to lose steam around the world, but it will continue above the pace of pre-pandemic high prices, keeping central banks in emerging countries under pressure.

Presenting a forecast of a 5.06% to 2.77% fall in inflation in 2022 compared to 2021 in 74 countries – excluding the group’s Venezuela and Argentina – Bradesco attributes the relief to the fact that prices have already increased too much and that the trend towards a better balance between demand, driven by the rise in interest rates, and supply, which tends to improve with the reduction of production bottlenecks.

Bad news

Inflation ended 2021 on the rise in almost all of the world. In the United States, it reached 7%, the highest in nearly 40 years. In the euro zone, 5%. And this result in rich countries is not good news for Brazil and other emerging countries. This is because the traditional remedy for fighting inflation is to raise interest rates.

And, if interest rates become more attractive in countries considered safe for investors to place their money, the tendency is to flee countries considered more problematic for investments, such as Brazil. In the local case, the scenario is even more complicated in 2022 due to the election, which should make the economic scenario more turbulent.

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