Brazil's Consumer Prices Expected to Rise in September Due to Drought Impact - Gabriel Burin
Brazil's consumer prices are forecasted to have increased in September after remaining stagnant in August, primarily due to a severe drought affecting agricultural output. The central bank responded to above-target inflation by halting interest rate cuts earlier this year and raising rates last month. However, concerns persist as long as public spending remains high.
The IPCA consumer price index for September is projected to have risen by 0.46% from August and 4.43% from a year ago, driven by higher energy tariffs and increased cigarette prices. The drought's effects are expected to put pressure on food and beverage prices, including fruit, meat, dairy products, and more.
Annual inflation has consistently exceeded the central bank's 3% target since June, with forecasts for next year indicating a rate close to 4%. Banco Central do Brasil chief Roberto Campos Neto attributes unanchored inflation to fiscal trends, as the government continues to boost the economy through spending.
Despite concerns, Lula's fiscal stimulus has bolstered economic activity, leading to a growth forecast upgrade for 2024. With a booming job market and rising real wages, service prices are expected to remain above 3.0%.
In conclusion, the impact of the drought on Brazil's consumer prices highlights the delicate balance between economic growth and inflation control. As investors and consumers, it is important to monitor these developments closely to make informed decisions about finances and investments.