Bolsonaro leaves Brazil without inflation: prices rose only 0.5% in December
The Brazilian Institute of Geography and Statistics (IBGE) confirmed that retail prices in Brazil registered an increase of only 0.52% during the month of December, in line with market forecasts and projections made by the Central Bank.
Brazil has regained stability and is on a disinflation path. The monthly inflation rate averaged only 0.02% during the second half of the year, while an average increase of 0.9% had been observed in the first half.
The monthly rate of increase in retail prices is currently similar to the average observed between 2017 and 2020, a period in which Brazil maintained inflation that did not exceed 5% year-on-year.
The measurement of the accumulated price expansion in the last 12 months is also evidence of the disinflationary process. Year-on-year inflation fell to 5.9% in December, after reaching a maximum of 12.13% in April.
Brazil registers the lowest cumulative inflation rate for 12 months since February 2021. The actually observed result was very similar to the projection of 5.7% made by the country’s monetary authority.
The year-on-year inflation in Brazil at the end of 2022 is below countries such as Germany, Spain, the United Kingdom, France, Italy, the United States, Australia, Belgium, Canada, Denmark, Finland, Sweden, the Netherlands, among many others.
Jair Bolsonaro‘s economic program laid the foundations to recover price stability, after the significant imbalances incurred in the pandemic or inherited from previous administrations.
Bolsonaro maintained a strict fiscal discipline policy on the federal government, a fact that completely eliminated the possibility of monetizing the deficit, and in this way endowed the Central Bank led by Roberto Campos Neto with credibility and reputation.
The entire fiscal deficit in Brazil is explained exclusively by debt interest payments, but the federal government is solvent and is capable of paying all its current expenses with genuine tax resources, without the need to resort to a monetary bailout.
Likewise, the President signed the Central Bank Autonomy Law to guarantee independence from any political power in power, and gave the monetary authority the necessary tools to control price increases.
Campos Neto raised the SELIC monetary policy rate to 13.75% annual nominal since August, and since then not only has it remained well above reference inflation, but it has also decreased by almost 6 percentage points until December.
The Brazilian economy is emerging as a very particular case at the international level, since it managed to produce a strong real increase in the monetary policy rate but without incurring a recession. In fact, the monthly economic activity accelerated its growth rate from October 2021 and accumulated an expansion of 4.33% since then.
With information from La Derecha Diario
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