January mid-month inflation index above expectations

Brazil’s IPCA-15 consumer price index, a mid-month inflation measurement that is considered to be a reliable predictor of the official rate, came in at 0.55 percent in January. The first reading of the year shows a continuing slowdown in price increases — but at a much slower pace than markets anticipated.

The index has risen by 5.87 percent in 12 months — a reduction of just 0.03 points compared with the previous 12 months. Additionally, inflation remains widespread across different sectors. 

All nine groups surveyed by the national statistics bureau IBGE experienced price bumps in the first half of January, with health and food products leading the way.

The health segment was impacted by higher prices for personal hygiene items and higher insurance premiums, the IBGE says. Food products, which gobble up a sizable portion of Brazilians’ income, were pushed up by increasing costs of eating at home. Still, food inflation appears to be easing.

As The Brazilian Report has shown, for this year inflation is expected to be driven by so-called “regulated prices,” which include fuel prices. Brazilian oil and gas giant Petrobras this Tuesday announced a 7-percent increase in gasoline prices, starting on January 25.

Due to Petrobras’s near-monopoly on oil refining in Brazil, its prices are market setters. The company justified the move by citing its pricing policy, which since 2016 is pegged to international fluctuations.

Year-end inflation expectations have deteriorated as of late. Per the Central Bank’s weekly survey of market analysts, estimates for the IPCA consumer price index for 2023 rose from 5.23 percent to 5.48 percent percent in four weeks. For 2024, forecasts stood at 3.84 percent, up from 3.6 percent a month ago.

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