The federal government’s economic team raised its projection for the National Consumer Price Index (INPC), which rose from 8.4% to 10.04%, according to the Macrofiscal Bulletin of the Ministry of Economy, released on Wednesday (17).
The index, which measures inflation for families with monetary income from one to five minimum wages, is the basis for the annual adjustment of the minimum wage by the government.
Thus, the need for a greater readjustment of the minimum wage will increase the expenditures of the 2022 budget, which is already tight, and reduce the fiscal space within the expenditure ceiling.
In the 2022 budget proposal, sent in August, the minimum wage would rise from the current R$1,110 to R$1,169, based on an INPC of 6.2%. Now, the number should rise to something around R$1,210, according to CNN calculations.
Previously, the economic team has already informed that each R$1 more in the minimum wage consumes around R$355 million from the public budget. Thus, the difference of another R$41 to be corrected in the 2022 budget by the modifying message will consume around R$14 billion of fiscal space next year.
Inflation
The government also raised its official projection for inflation for 2021. The expectation is that the Broad Consumer Price Index (IPCA) will close the year at 9.7%. In the previous edition of the document, published in September, the forecast was for inflation of 7.9%.
If confirmed, the value exceeds the target ceiling stipulated by the National Monetary Council (CMN). While the center of this year’s inflation target is 3.75%, the 1.5 percentage point tolerance range leaves room for the IPCA to vary between 2.25% and 5.25%.
For next year, the IPCA projection went from 3.75% to 4.7%, also above the center of the 3.5% inflation target in 2022, but still within the upper limit of 1.5 points for above (5%). When the target is not met, the Central Bank has to write a public letter explaining the reasons.
This is because the main tool to pursue the inflation target is the basic interest rate, the Selic, defined by the BC’s Monetary Policy Committee (Copom).
The government’s numbers are similar to the expectations of the financial market, which estimates inflation of 9.77% in 2021 and 4.79% in 2022.
Reference: CNN Brasil
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