Brazil’s inflation could end lower than that of the US

RIO DE JANEIRO, BRAZIL – Brazil’s inflation is slowing and could end the year below that of the United States after the Latin American nation withdrew monetary and fiscal stimulus last year, said Economy Minister Paulo Guedes.

By the end of 2022, consumer price gains will slow from their current annual rate of 10% to about 5% after the early elimination of incentives granted during the pandemic, Guedes told Bloomberg Television’s Shery Ahn during an interview in New York.

“We adjusted fiscal policy during the recovery, so there was no inflationary pressure,” the minister said. “It’s basically about global inflation when we talk about inflation in Brazil.”

A year ago, Latin America’s largest economy embarked on an aggressive interest rate tightening cycle, raising borrowing costs from a record low of 2% to 10.75% to control incipient inflationary pressures. Even so, consumer price increases remain around a five-year high. In the second half of 2021, the Brazilian economy entered a recession and is expected to grow by just 0.3% this year.

US consumer prices rose in January to a new four-decade annual high of 7.5%. Unlike Brazil’s central bank, the Federal Reserve delayed monetary tightening and until recently signaled that it plans to begin raising interest rates next month.

Brazil is moving from a state-driven economy to one where the market plays a central role, Guedes also noted during the interview. The country has R$828 billion (US$161 billion) in private investment commitments “to rebuild the Brazilian economy” in the coming years in sectors including natural gas, oil, ports, and infrastructure, he said.

“These are signed contracts; they are not PowerPoints or plans,” he said. “This is a private sector reinvestment for the next ten years.”

With information from Bloomberg