Central Bank of Brazil expects inflation to ease in 2022

The president of Brazil’s central bank, Roberto Campos Neto, said on Friday that the body expects inflation to peak this year and to recede in 2022.

In an event with real estate executives, Campos Neto said that the agency estimates that inflation will reach its highest level in September, but that it was surprised by the magnitude of the impact on energy prices.

Last week the Brazilian Institute of Geography and Statistics (IBGE) revealed that the monthly inflation rate in Brazil rose 1.25% during October and was above the records of October 2002, when consumer prices rose 1.31 percent.

The largest economy in Latin America saw consumer prices rise in October due to the increase in fuel costs, which brought annual inflation to 10.67 percent.

The official added that the central bank is ahead of the curve of increases in interest rates, but that the policy on financing costs must consider that Brazil has had serious episodes of uncontrolled inflation.

“The cost of monetary policy not doing its job is higher for society,” he said. Interest rate hikes are likely to affect demand for mortgages and Campos Neto said there will be discussions on the matter at a meeting with CEOs of Brazilian lenders on Friday.

Brazil’s central bank will lower its projection for GDP growth in 2022 from the current estimate of 2.1%, but not as much as market analysts predict, Campos Neto added.

The central bank’s latest Focus survey showed estimates of 0.7% GDP growth for next year.

In addition, Campos Neto said that the members of the entity were concerned about the current situation of Covid-19 in Europe, the new South African variant and its impact on the global economy.

The Sao Paulo Stock Exchange, the largest in Latin America, closed on Friday with a 3.39% decline at 102,224 points, amid fears in the market over the possible arrival of a new variant of coronavirus detected in southern Africa called Omicron.

The main Bovespa index fell 4% in the session, a reaction similar to that of international markets, after South African scientists warned of a new variant of Covid-19, potentially more contagious and with multiple mutations.