July 2, 2022

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How does inflation affect the daily lives of Brazilians?

Understand how high inflation is affecting the Brazilian economy and what to expect in the coming months.

Estimated reading time: 3 Minutes

With the rise in inflation the purchasing power of Brazilians has been increasingly reduced. Common components of everyday life, such as cooking gas, food, petrol and electricity, show large increases in prices and are directly affected by high inflation.

According to the Broad Consumer Price Index (IPCA), the official measure of inflation, the capture rate in April 2022 was 1.06%, the highest level for the month since 1996.

Rise in the value of the basic food basket due to inflation

According to a study by ABRAS (Brazilian Association of Supermarkets), basic food baskets, essential for daily living, increased by 5.11% in the first months of this year. This increase is caused by the shift in food production costs, especially the higher prices of diesel, which fall on the inventory of commodities.

To illustrate the example, Brazilian morning coffee has accumulated 67.53% more in the last 12 months.

Public transport also suffers from high inflation. Considering that many people rely on these means of transportation on a daily basis, the impact is direct. Bus fares have increased by 4.46% in one year. On the other hand, the tunnel underwent 3.64% restructuring in April alone.

How is IPCA calculated?

The IPCA (Wide Consumer Price Index) has been calculated by the IBGE (Brazilian Institute of Geography and Statistics) since 1980. The purpose is to show the price changes for different products and services each month.

377 items are analyzed according to the POF (Family Budget Survey), which records what households consume. The items examined are divided into nine groups: housing, food and beverage, clothing, transportation, household goods, hygiene, expenses, communication and education.

For the survey, IPCA checks prices in 10 cities across the country. The determination of the general index is carried out from the average weight of prices, taking into account the monthly variations.

What are the expectations for inflation?

According to economists, inflation should be twice the defined value of the Copom (Monetary Policy Committee), reaching 8%. A reduction in the second half of this year is possible, however, as it does not represent a reduction or stabilization, as prices will only increase marginally.

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