Investors Fear Brazil Is Stuck in Low Growth and High Inflation

50 reais Consumer prices in Brazil ended 2012 near the top of the Brazilian central bank’s target range for the third year running, prompting concern from economists that the country is stuck in a phase of low growth and high inflation.

Brazilian inflation in December was 5.84% against a year earlier – well above the middle of the central bank’s target zone of 4.5% plus or minus two percentage points – despite economic growth last year that was estimated to have been only about 1%.

The central bank, which said the December consumer prices figure was on track with its forecasts, is keen to maintain the credibility of its inflation-targeting regime in a country where prices remain a sensitive issue.

Brazil’s present economic stability is based largely on its achievement in vanquishing runaway inflation, which in earlier decades was measured in hundreds rather than single-digit percentage points.

Alexandre Tombini, the governor of the Central Bank of Brazil, said the 2012 figure was less than in 2011, when inflation touched the top of the bank’s range of 6.5%. Inflation was therefore “converging” towards the center of the target as the bank had promised.

Tombini said inflation was boosted in the second half of 2012 by several “shocks”, such as a rise in the price of agricultural commodities.

“In the short term, inflation is showing some resistance, but there are indications it will return to a downward trend in 2013.”

Economists said they did not expect inflation this year to breach the upper end of the central bank’s target range because economic growth was predicted to remain relatively tepid.

Many economists are forecasting the economy will expand by 3.5% this year, but see the possibility that the figure could be lower.

Much would depend on whether the government would be able to implement a cut in electricity tariffs, which will lower prices for consumers by as much as 16%, said Capital Economics.

“In the absence of an immediate cut in tariffs, inflation is likely to rise above 6% in the first quarter of this year,” added the London-based research house.

Mercopress

 

Tags:

You May Also Like

Presidential Hopeful Marina Vows to Restore Brazil Credibility and Recruit Brightest Minds

Opposition Brazilian presidential candidate Marina Silva said that Brazil’s recession is very worrying and ...

Brazil Blames Crisis for Slowdown in Chicken Exports

Brazilian exports of chicken should end the year at between 3.6 million and 3.7 ...

Brazil Praises Encounter Between Lula and EC President

Brazil’s Minister of Finance, Antônio Palocci, said that the  Janunary 28 meeting between Brazilian ...

Willy Herrmann

Willy Herrmann, the German Guy Who Became Brazil’s Mr. Formula Indy

What do the family of Brazil’s largest supermarket chain, a former Brazilian telenovela (soap ...

In Guinea Bissau Brazil’s Interest Is Only Political

Brazil intends to effectively influence the democratization process in Guinea Bissau, country that was ...

Brazil’s Lula Confesses Obsession: Cutting Bank Spreads

Brazilian Aldemir Bendini is the new chief executive of federally owned Banco do Brasil. ...

Brazilian President, Luiz Inácio Lula da Silva

Why Is Brazil’s Lula Unbeatable? It’s the Economy, Stupid!

Incumbent President Luiz Inácio Lula da Silva is campaigning for a second term in ...

Brazil’s Eliane Elias Revisits Old Friend Jazz Great Bill Evans with Tribute

Pianist Bill Evans, one of the most influential jazz musicians of the 20th century ...

UN Calls for an End to Slavery in Brazil

An United Nations independent human rights expert has called Brazil to strengthen efforts to ...

16 Brazilian Congressmen Get Reprieve to Dispute Corruption Charges

The leadership of Brazil’s Chamber of Deputies decided, Thursday, September 15, to grant a ...