São Paulo – Economic activity in Brazil returned to growth in August as against July and recorded growth of 0.08%, according to figures disclosed on Wednesday (16) by the Central Bank of Brazil (BC). In comparison with the result obtained in August 2012, the Economic Activity Index of the Central Bank (IBC-Br) grew 1.32%.
The Central Bank and the market consider the IBC-Br a forecast of the Brazilian Gross Domestic Product (GDP) expansion. This year, the index presented growth in January (1.18%), March (1.07%), April (0.93%) and June (1.02%). Since January, the accumulated result is 2.76%. Over the last 12 months, in turn, expansion is 2.13%.
To calculate the IBC-Br, the Central Bank estimates growth of activities like agriculture, services, industry and also tax collection. The index is one of the main instruments used by the BC to calculate the interest rate and to control inflation.
If the IBC-Br shows lower activity in one period, the tendency is for lower inflationary pressures. With lower inflation, the Central Bank may reduce the benchmark interest rate (Selic) thus stimulating the economy. However, if the IBC-Br presents too strong growth and there is a tendency for higher prices, it is then possible for the Central Bank to increase the Selic in the Monetary Policy Committee (Copom) meeting.
Currently, the benchmark interest rate is 9.5% a year. It was increased by 0.5 percentage point last Wednesday (9) due to inflation. The inflation target is 4.5% a year, with variation of 2 percentage points up or down. In September, according to the official index, inflation as measured by the Brazilian Institute for Geography and Statistics (IBGE) was 0.35%. In the year, price hikes have reached 3.79% and over the last 12 months, 5.86%.
The president at the Central Bank of Brazil, Alexandre Tombini, said last week, at an International Monetary Fund (IMF) meeting, that Brazil is engaged in maintaining inflation under control.
*Translated by Mark Ament
