Economy

Has Brazil beaten inflation?

The inflation o tomato prices in 2018 was of over 71%

Consumer inflation, measured by the benchmark IPCA index, ended 2018 at 3.75 percent. This was in line with analysts’ expectations and was within the target band of 3 to 6 percent, after missing it in 2017. The result indicates that price dynamics in Brazil are finally returning to what can be considered “normal” by most economists.

Over the past couple of years, the IPCA faced sharp variations and a period of tolerance with higher price increases from the mid-2000s to the early 2010s as part of a strategy to boost the economy via a heated consumption market.

This year’s increment is higher than the 2.95 percent recorded in 2017 and was mostly influenced by prices related to Housing (up 4.72 percent), Transportation (4.19 percent) and Food and Beverages (4.04 percent). These three groups, of a total of nine, were responsible for two-thirds of the increase, according to data published this Friday (11) by national statistics agency IBGE.

Márcio Milan, an economic analyst at Tendências consultancy firm, highlighted the inflation level in services, which has finally dropped below 4 percent after years of hikes around 8 percent. “The spike in unemployment and the shrinkage of the labor income helped to keep prices of services at a more comfortable level of 3.3 percent this year,” he says.

In other words, the good news is a result of a bad overall scenario. Inflation only decreased because the Brazilian economy is still fragile. After one of its longest recessions in history, activity is recovering at the slowest pace ever recorded.

Unemployment is steadily decreasing but remains high. Under-employment is the new game in town. Brazil has now more workers...

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