Brasília – The appreciation of the dollar and the expected increase of administered prices (such as energy and fuels) should keep the inflation rate above the target center of 4.5% in 2015, estimates the Brazilian Central Bank (BC) in the minutes of the Monetary Policy Committee (Copom) meeting released this Thursday (11). For the monetary authority, the inflation will start to drop next year, but at a slow pace, only meeting the target center as of 2016.
Last week, BC raised the benchmark rate Selic – main interest rate – to 11.75% a year. The rate is the main instrument for inflation control.
According to the BC, the intensification of the monetary tightening was needed because the exchange rate and the administered prices, such as gas, are causing an adjustment of relative prices in the economy. Besides, the expected readjustment of public fares, such as water, energy and transportation, will require a greater effort by the Central Bank.
“For Copom, the fact that the inflation is currently still high reflects, in part, to the occurrence of two important processes of relative prices adjustment in the economy – realignment of domestic prices in relation to international ones (dollar appreciation) and realignment of administered prices in relation to the free ones. The Committee also considers that, since its last meeting, among other factors, the intensification of these relative price adjustments in the economy turned the balance of risks for the inflation less favorable”, pointed the minutes.
BC kept the estimative that the administered prices will rise to 5.3% in 2014 and 6% in 2015. For 2016, nevertheless, the monetary authority raised the projection from 4.9% to 5.2%.
In November, the Extended National Consumer Price Index (IPCA), which measures the country’s official inflation, reached 6.5% in the 12 month cumulative. For the fourth month in a row, the indicator is above the inflation targets system ceiling of 6.5%, which established a 4.5% target with two percentage points as tolerance. However, the target only counts after the year is closed. Both the market and the Ministry of Finance believe the inflation will close 2014 under the 6.5% target.
*Translated by Sérgio Kakitani
