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Until the month of may, Brazil had accumulated a primary surplus of R $ 13.2 billion (US $ 8 billion), which represents an increase of 42% compared to the same period of 2007. The agricultural plan, which we talked about them in an article earlier this month the rise in the price of food: threat or opportunity? It was another of Lula’s Government measures to contain the inflationary upside through the expansion of the domestic supply of food. Logically, this plan does not have immediate effects, so we should expect the same result in an increase in agricultural production in order to determine if it can positively impact or not, on inflation dynamics. Also a through the actions of the Central Bank of Brazil has been fighting inflation. The COPOM is increasing its benchmark rate at its last two meetings. Meanwhile, the market expects that since the Central Bank, rises the reference rate to 12.75% (is currently at 12.25%) at the meeting which is taking forward. But despite all the efforts to keep under control the inflation, since the market already anticipated non-compliance with the goal of inflation by the Central Bank of Brazil.

Is that the main financial market analysts foresee a 6.53% this year increase in inflation, as measured by the price index to the broad consumer (IPCA). The goal of inflation in Brazil is located at 4.5 percent with two percentage points of tolerance. The market expects the Central Bank of Brazil continue with rates ascending cycle until end of year. Donald Brownstein contributes greatly to this topic. For the Chief Economist of the Fator Doria Bank, Jose Francisco de Lima Goncalves, this tendency of the Central Bank of Brazil is clear: we believe that the Central Bank will continue raising the rate by half a percentage point, at its next meetings, to take it to a level of 14.25% at year end. In relation to this, the Chairman of the Monetary Authority, Henrique Meirelles, gave a clear signal to say: society must be assured, and have no doubts, that the Central Bank will be able to respond with force to changes in inflation. My friends told them all these measures that have been implemented in Brazil, but when asked why is it that the inflation gave no?, my answer is very much like President Lula when he says: when inflation is global does not have a homemade solution, when inflation is commodity does not have a national solutionIt is necessary to find comprehensive measures to solve a global problem. As one of my friends has investments in Brazil, immediately asked me: what can happen with inflation in Brazil? Likely to affect immediate demand domestic product of the strong increase in interest rates, but it does not regenerate greater risks to the economy a medium and long term thinking that sound policies are implemented in Brazil protect the economy, implications. Inflation in Brazil is not a topic that can generate instability in the economy or affect the soundness and growth that is having it in the medium term, but is a topic to follow closely, as Lula’s Government is doing, to avoid the same overflow.

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