Inflation Picks up the Pace
Brazil's inflation rate in January rose at the fastest monthly pace in nearly 12 years as a government austerity drive begins to take hold in the country.
Inflation rose 1.24 per cent during the month compared with December and 7.14 per cent compared with a year earlier, breaching the top of the central bank`s target range for annual inflation of 4.5 per cent plus or minus 2 percentage points.
“This was the highest rate [of inflation] since February 2003,” said the Brazilian institute of geography and statistics, or IBGE.
The increase in inflation, which was caused by a combination of rising food, electricity and bus prices, adds to challenges facing the government of Brazilian president Dilma Rousseff.
She is trying to rebalance the budget after a prolonged fiscal stimulus that has sent the government`s accounts deep into the red without reviving economic growth.
During her first four-year term in power, which ended last year, Ms Rousseff`s government sought to control inflation by suppressing energy and fuel costs for consumers while municipal and state governments also failed to raise public transport prices.
This year, with rating agencies threatening to downgrade Brazil`s investment grade credit rating unless it rebalances the budget, she has been left with little choice but to make the politically unpopular decision to let prices adjust.
“We expect inflation to accelerate to 7 per cent-plus in 2015, from 6.4 per cent in 2014, given the normalisation of administered tariffs, tax increases to buttress the budget, and the phasing out of several tax breaks/benefits,” said Alberto Ramos, Goldman Sachs economist, in a research note.
Among the items that showed significant price increases in January, perishable food was up 9.1 per cent, electricity tariffs 8.3 per cent, urban bus tariffs 8 per cent and long-distance bus fares 6.6 per cent, Goldman said.
The increase in inflation was close to an estimate of 1.25 per cent for the month in a survey of analysts by Bloomberg.
Brazil inflation rate gathers pace
Brazil's inflation rate in January rose at the fastest monthly pace in nearly 12 years as a government austerity drive begins to take hold in the country.
Inflation rose 1.24 per cent during the month compared with December and 7.14 per cent compared with a year earlier, breaching the top of the central bank`s target range for annual inflation of 4.5 per cent plus or minus 2 percentage points.
“This was the highest rate [of inflation] since February 2003,” said the Brazilian institute of geography and statistics, or IBGE.
The increase in inflation, which was caused by a combination of rising food, electricity and bus prices, adds to challenges facing the government of Brazilian president Dilma Rousseff.
She is trying to rebalance the budget after a prolonged fiscal stimulus that has sent the government`s accounts deep into the red without reviving economic growth.
During her first four-year term in power, which ended last year, Ms Rousseff`s government sought to control inflation by suppressing energy and fuel costs for consumers while municipal and state governments also failed to raise public transport prices.
This year, with rating agencies threatening to downgrade Brazil`s investment grade credit rating unless it rebalances the budget, she has been left with little choice but to make the politically unpopular decision to let prices adjust.
“We expect inflation to accelerate to 7 per cent-plus in 2015, from 6.4 per cent in 2014, given the normalisation of administered tariffs, tax increases to buttress the budget, and the phasing out of several tax breaks/benefits,” said Alberto Ramos, Goldman Sachs economist, in a research note.
Among the items that showed significant price increases in January, perishable food was up 9.1 per cent, electricity tariffs 8.3 per cent, urban bus tariffs 8 per cent and long-distance bus fares 6.6 per cent, Goldman said.
The increase in inflation was close to an estimate of 1.25 per cent for the month in a survey of analysts by Bloomberg.