Opinion

Brazil’s inflation woes may be temporary, but economic concerns are not

Inflated prices of foods and basic goods have been the bane of Brazilian consumers in 2021. But while these hardships are set to dissipate, the country has larger structural problems to contend with

Brazil's Economy Minister Paulo Guedes. Photo: Salty View/Shutterstock
Brazil’s Economy Minister Paulo Guedes. Photo: Salty View/Shutterstock

Market economists, usually inflation hawks, enjoy paraphrasing Milton Friedman’s famous line about government programs, saying that “nothing is so permanent as temporary inflation.” This credo finds significant purchase in Brazil, with its long history of volatile consumer prices and indexation. Latest data shows 12-month inflation running above 8 percent, boosted by the demand shock that followed the first wave of the coronavirus pandemic.

And year-end market expectations point toward some undesirable stickiness, with yearly inflation in December tipped to reach 6 percent, above the Brazilian Central Bank’s 5.25 percent tolerance interval. 

The monetary authority’s claims of “temporary shocks” have...

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