Brazil’s Getúlio Vargas Foundation forecasts 0.3% rise in January’s IPCA-15

RIO DE JANEIRO, BRAZIL – A projection made by the Getúlio Vargas Foundation (FGV) on Tuesday, January 25, shows that the IPCA-15 (Extended National Consumer Price Index-15), considered the inflation forecast, should rise by 0.3% in January over December 2021.

The official indicator will be released this Wednesday, January 26, by the Brazilian Institute of Geography and Statistics (IBGE).

FGV’s economist André Braz said that positive inflation is expected for the coming months. He explained that the indicator will be pressured by electricity and crops damaged by the lack of rain.

“The south of Brazil is experiencing a drought period, which affects the price of foods such as chicken, meat, rice, milk, and derivatives, which may rise by up to 15%. The impact of seasonal issues, such as summer and the La Niña phenomenon, leads to crop shortages and affects inflation throughout the year. The corn harvest, for example, raises the price of chicken meat because it is the main feed for poultry,” the economist pointed out.

Braz also draws attention to the water shortage, which affects reservoirs and prompts the government to turn on more thermoelectric power plants, a factor that raises the electricity bill.

According to the economist, energy should remain on the inflation radar this year, and the trend is for an increase in the indicator in the first months of 2022. However, he expects the index to decelerate in the second semester.

“We expect a higher inflationary persistence in the first quarter this year, taking into account the unfavorable weather conditions, such as the lack of rain. But the trend is that from the second quarter on, should there be an improvement in the weather, the index will decelerate,” André Braz says.

Although gasoline prices have been undergoing an upward readjustment, Braz points out that it should not yet be as expressive in this preview, since the adjustment announced by Petrobras occurred in early January.

He expects that fuel prices will start to affect inflation from February. In addition to gasoline, next month’s projection will also be impacted by school tuition fees.