Brazil Inflation Highest in 12 Years
World Economy

Brazil Inflation Highest in 12 Years

Brazil’s inflation rate closed 2015 at the highest level in more than 12 years, above 10%, overshooting the government’s target and prompting the central bank to vow action to curb prices despite a deepening recession.
In a public letter explaining why policymakers missed the target, central bank chief Alexandre Tombini reaffirmed that the bank will take the necessary measures to curb prices, signaling a rate hike despite calls from some politicians and government peers against it, Reuters reported.
Consumer prices as measured by the benchmark IPCA index rose 10.67% in 2015, statistics agency IBGE said on Friday, well above the official target range of between 2.5 and 6.5%. Tax hikes, high public spending and a strong El Nino contributed to Brazil’s 2015 inflation being more than predicted when the year started.
Tombini said a weaker real and a sharp increase in government-controlled prices were also behind the surge in inflation, which is stoking discontent among Brazilians struggling with what could be the worst recession in a century. Masked youths protesting an increase in bus fares on Friday clashed with police in Brazil’s biggest city, Sao Paulo.
Although the central bank expects inflation to ease back to the target range this year, policymakers are under tremendous pressure to avoid resuming rate hikes at its next meeting on Jan. 20. More rate increases could further complicate the political standing of President Dilma Rousseff, who is scrambling to strengthen her leftist support base in Congress to survive impeachment proceedings.
The head of her Workers’ Party, Rui Falcon, has publicly called on the bank not to resume rate hikes that could further sink an economy expected to contract 3% this year. Economists believe the economy contracted 4% in 2015. Most Brazilians have lived through waves of hyperinflation until the creation of the real currency in 1994.
At 14.25%, the Brazilian central bank benchmark Selic rate is the highest among major global economies. Although the current price spike is not nearly as severe as previous episodes of runaway inflation, it has helped erode the popularity of Rousseff struggling with a massive corruption scandal involving dozens of lawmakers from her Workers’ Party and allied parties.
Brazil’s inflation is set against a backdrop of deflation fears elsewhere in the world, caused by slowing Chinese growth and falling oil and commodities prices. Most of Brazil’s price pressures are homegrown, underpinned by loose fiscal policy and successive increases in the minimum wage regardless of productivity gains.
Economists expect Brazil’s inflation rate to peak in a few months and close the year at just below 7%, still above the government’s target, according to a central bank poll.
Prices rose 0.96% in December, slightly below market forecasts in a Reuters poll.

Short URL : http://goo.gl/bw4MAH
  1. http://goo.gl/lOZe6b
  • http://goo.gl/2J5SZa
  • http://goo.gl/xwBvJk
  • http://goo.gl/rHRafP
  • http://goo.gl/yqjktz

You can also read ...

More and more Thai merchants are integrating WeChat Pay and Alipay’s systems to cater to tourists.
The internet has changed the way most people live. Through...
Cambodia’s economic outlook remains positive, but is subject to downside risks.
The IMF Managing Director Christine Lagarde expressed optimism...
More India Bank Frauds Revealed
Over 25,800 fraud cases involving about Rs179 crore ($1.79...
Qatar Calls to Investigate UAE Bank’s Bogus Deals
Qatar has asked US regulators to investigate the US subsidiary...
Free trade achieves more good for the planet.
US President Donald Trump’s steel tariffs have brought the...
Morocco Currency Reform on Right Track
Few weeks after the launch of the gradual dirham float, the...
EU Readies Tax on US Technological Titans
The European Union will next week unveil plans for a digital...
Apparel imports from ASEAN are growing, spurred by low labor costs  in such countries as Vietnam.
Import prices for apparel and daily goods in Japan plunged...