Brazil’s consumer prices rose by 1.31% in February, the largest increase since March 2022, with annual inflation reaching 5.06%. The Central Bank plans a 100-basis-point rate hike to combat inflation, particularly in housing and food sectors. The government’s measures, such as duty cuts on imports, may have limited impact, and Lula’s approval ratings are declining amidst rising prices.
In February, Brazil experienced a significant surge in consumer prices, the highest increase in three years, as reported by recent official data. Prices rose by 1.31 percent, matching the median economist estimate from Bloomberg, with annual inflation accelerating to 5.06 percent. This spike, driven primarily by soaring food costs, has intensified pressure on President Luiz Inácio Lula da Silva’s administration to take action in alleviating the financial burden on consumers.
The Central Bank of Brazil is set to raise interest rates for the third consecutive time by a full percentage point next week, a strategy aimed at curtailing inflation while risking slower economic growth. Adriana Dupita, Bloomberg’s economist for Brazil and Argentina, noted that inflation in February was influenced by temporary and seasonal factors and expects inflation to exceed target levels through 2025 unless influenced by rapid currency improvement or a swift economic downturn.
Housing costs emerged as a major contributor to inflation, with an increase of 4.44 percent attributed to rising utility expenses following the expiration of energy credits. Additionally, education costs increased by 4.7 percent, while food and beverages saw a nominal rise of 0.7 percent. These increases in prices have led to consumer dissatisfaction, particularly aimed at President Lula, whose approval ratings have dropped significantly amidst these economic challenges.
In response to public discontent, the government has proposed measures, including the reduction of duties on imported food. However, many economists believe that these efforts will have a limited effect and predict that annual inflation will likely remain above the three percent target for an extended period.
February’s inflation surge in Brazil has marked a pivotal concern for President Lula’s administration, prompting anticipated interest rate hikes to combat rising prices. The substantial increases in housing, education, and food costs have contributed to public dissatisfaction, severely impacting Lula’s approval ratings. Although government measures have been initiated, their effectiveness in curtailing inflation remains uncertain, with expectations of sustained inflation pressures ahead.
Original Source: www.batimes.com.ar
