BC President talks about lower IPCA before emerging markets, and warns of volatile items

The president of the Central Bank, Roberto Campos Neto, highlighted this Wednesday, 2nd, in a closed meeting with investors, the strong deceleration of Brazilian inflation compared to other emerging markets, but considered that, when volatile items are removed from the account, the inflation index of the Country is still one of the largest in the group in 12 months. The information is contained in the presentation made at the meeting organized by Santander in Madrid, Spain, released by the BC.

The document shows that Brazilian inflation was the second highest in the group of countries at the beginning of this year, second only to Russia, affected by the economic consequences of the invasion of Ukraine. Now, in September, the official inflation index – IPCA – in 12 months (7.2%) was already the second lowest, behind only China.

But, when food items and energy-related prices are removed, Brazilian inflation is still among the three highest in the group, around 10%, appearing after Russia and Chile.

However, the presentation also shows that Brazil is not the only country among emerging countries that have inflation expectations for 2022 (5.61%) and 2023 (4.94%) above the target. Mainly Latin American countries have the same picture, such as Colombia, Chile and Mexico.

Regarding the fiscal framework, Campos Neto pointed out that the expenditure to mitigate the cost of energy, considering fuel, in Brazil was lower than in European countries, strongly affected by the reduction of natural gas supply by Russia.

According to the chart in the document released by the BC, the cost of Brazilian measures was around 2% of the Gross Domestic Product (GDP), while in the United Kingdom it exceeded 6%. In Italy, Spain, France and the Netherlands, spending was close to 3% of GDP.

Campos Neto also commented again on the acceleration of monetary tightening in developing countries and on the prospect of a slowdown in economic activity in the world. “In China, there were positive surprises in the third quarter of 2022, but there are signs of an economic slowdown. The real estate sector is very important for GDP and for the wealth of families.”

The BC president repeated that Brazil is an “exception” in terms of economic activity prospects, with increased growth projections, while the world has a more negative prognosis, according to the presentation.