Worst moment of inflation is over, but prices will not fall

Worst moment of inflation is over, but prices will not fall

The president of the BC (Central Bank), Roberto Campos Neto, said at the end of June that the worst moment of inflation is over. Despite being good news, the experts heard by the UOL say that this does not mean that prices will fall and relieve Brazilians’ pocketbooks.

What will happen? The inflation index should be lower compared to previous months, and some things may even go down in price. But, in general, prices will continue to rise, but at a slower pace.

Silvio Campos Neto, economist and partner at Tendências Consultoria, says that the peaks of inflation recorded in March and April of this year should not happen again – inflation was 1.62% in March and 1.06% in April. In practice, inflation rates should be lower.

According to the latest official data, inflation in June was 0.47% in the month and accumulated a high of 11.89% in the last 12 months.

What changes in my life? This does not mean that Brazilians will be in a comfortable financial situation in the short term. In practice, saying that the worst moment of inflation is over means that prices will not rise as much.

Prices continue to rise, but when we say that the worst of inflation is over, we are referring to the speed of price increases. We are not going to have deflation in Brazil, says Mauro Rochlin, an MBA professor at FGV (Fundação Getulio Vargas).

What can reduce inflation? For the experts heard by the UOL, the changes in taxes adopted by the federal government. such as the reduction of ICMS (Tax on the Circulation of Goods and Services) in the states for fuel, can help reduce inflation in the short term.

The tax reduction is valid until the end of this year, which means that next year prices should rise again with the return of taxes.

What can make inflation worse? The dollar can appreciate, and this increases inflation because of imported products consumed directly by people and costs in companies that work with raw materials from abroad. The international price of oil and other commodities (such as food) can also get in the way. But for now, we should see a easing of inflation in the second half of the year, says Cristiane Quartaroli, economist at Banco Ourinvest.

Some situations that make the dollar rise are global inflation, the war between Ukraine and Russia, public spending with extra government funds for social assistance and high interest rates in the United States.

Source: Uol

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