Inflation and the Labor Market

BRAZIL ECONOMICS - Report 13 Jul 2015 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

With the current real interest rate, inflation will decline significantly in 2016. But for the time being, the trend is still upward: in the 12 months through June it stands at 8.89% and the consensus projections for 2105 are a bit higher than 9%. That growth is only partly due to adjustment of administered prices, greater than supposed at the start of the year, and the unexpected increase in some food prices. The high diffusion index and core inflation rates by trimmed means with smoothing show that rising prices are not restricted only to a few items (Graph 1), possibly a consequence of profit margins recomposition in products whose costs have been strongly affected by the administered prices increase.

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