Inflation: April IPCA-15 slows down to 0.57%, says IBGE – 04/26/2023 – Market

Inflation measured by the IPCA-15 (National Consumer Price Index Broad 15) slowed the pace of growth to 0.57% in April, reported this Wednesday (26) the IBGE (Brazilian Institute of Geography and Statistics).

The result came in below the median of market projections. Analysts consulted by the Bloomberg agency projected an increase of 0.60%, after the variation of 0.69% in March.

With the April result, the index slowed down to 4.16% in the accumulated 12 months. It is the lowest level since October 2020 (3.52%). In the accumulated, the rate was 5.36% until March.

The official inflation index in Brazil is the IPCA (National Consumer Price Index), also released by the IBGE. As the IPCA variation is calculated over the reference month, the April data is not yet finalized. It will be known on May 12th.

The IPCA-15, due to the fact that it was released earlier, signals a trend for prices. Its variation is calculated between the second half of the previous month and the first half of the data reference month – in this case, March and April.

The center of the inflation target pursued by the BC (Central Bank) for the IPCA is 3.25% in 2023. The tolerance interval is 1.5 percentage points more (4.75%) or less (1. 75%).

Despite the accumulated IPCA-15 (4.16%) having been below the ceiling for the IPCA (4.75%), analysts expect inflation to regain strength in the second half of the year. Part of this projection is associated with the effect of the basis for comparison.

In the second half of 2022, the prices of products such as fuel were artificially reduced by the tax cut announced by the Jair Bolsonaro (PL) government on the eve of the elections.

The increase predicted by the financial market for the IPCA is 6.04% in the accumulated of 2023, according to the Focus bulletin published by BC on Monday (24). If the result is confirmed, this will be the third consecutive year of exceeding the goal.

In an attempt to contain inflation, the Central Bank has been maintaining the basic interest rate (Selic) at 13.75% per year. The next Copom (Monetary Policy Committee) meeting is scheduled for next week, on May 2nd and 3rd.

At the beginning of the year, President Luiz Inácio Lula da Silva (PT) made a series of criticisms of the BC’s actions and the institution’s president, Roberto Campos Neto. Lula went so far as to say that the Selic level is a “shame”, defending the reduction of interest rates.

The Selic at a high level seeks to cool the demand for goods and services, curbing prices and anchoring inflation expectations. The expected side effect is the loss of breath of economic activity, because the cost of credit is higher for companies and consumers.