São Paulo – The president of the Brazilian Central Bank (BC), Alexandre Tombini, said this Friday (14th) that the inflation should reach its peak this quarter and will start to drop in 2016. “The accumulated inflation in 12 months should reach its peak this quarter and remain at high levels until the end of the year, and after this start a downward trend”, he added, when opening the 10th Annual Seminar on Risk, Financial Stability and Banking in the city of São Paulo.
In BC’s estimation, the inflation measured by the Extended National Consumer Price Index (IPCA) should stand at 9% this year. For 2016, the estimation is for the inflation to drop and close the year at 4.8%.
Tombini said that the forecast is for the inflation to return to the midpoint of the target in 2017. “At the beginning of the year, the average of the estimations for the inflation rate from 2017 to 2019 was way above the 4.5% per year level. Currently, there is a convergence of expectations for the midpoint of the target in a medium and long-term period”, he added. The BC’s inflation target midpoint is 4.5%, with a variation of two percentage points up or down.
To avoid that the increase of prices continue beyond this year, BC’s president pointed out that the benchmark interest rate (Selic) should stay at high levels. “Keeping the current level of the benchmark interest rate – necessary for sufficiently extended periods – is necessary for the convergence of the inflation rate to the target of the end of 2016”, he emphasized. Currently, the Selic is at 14.25% per year.
Among the causes for inflation, Tombini listed the dollar appreciation against the currencies of the emerging economies and the increase of the administered prices, such as electric power. “As we know, the adjustment of the relative prices, represented by the strengthening of the dollar and by the increase of the administered prices have raised important challenges to the conduction of the monetary policy. These price adjustments make the inflation go up in the short-term and keep it at high levels in 2015.”
*Translated by Sérgio Kakitani
