Brazil fuel price hike to trigger inflation revision, says central bank chief By Reuters

¬© Reuters. FILE PHOTO: Brazil’s central bank Governor Roberto¬†Campos¬†Neto¬†reacts during a¬†session¬†of the¬†Brazilian¬†Senate¬†in Brasilia,¬†Brazil¬†February 15, 2023. REUTERS/Adriano Machado/File Photo

BRASILIA (Reuters) -Brazil will likely need to upwardly revise its inflation estimates, central bank Governor Roberto Campos Neto said on Tuesday, after state-run oil giant Petrobras announced a fuel price hike earlier in the day.

According to Campos Neto, who was speaking at an event hosted by lawmakers, the move’s impact on inflation is expected to amount to around 0.4 percentage point between August and September.

Petrobras said it will raise average gasoline prices by 16.3% to 2.93 reais ($0.5893) per liter beginning Wednesday, while diesel prices will be increased by 25.8% to 3.80 reais per liter.

The central bank chief stressed that while the result of higher diesel prices was indirect, more expensive gasoline reflects directly on the benchmark IPCA inflation index.

On the other hand, he added that services inflation – which the central bank has been closely monitoring – has started to fall, “and it’s important that it does.”

The bank embarked on an easing cycle earlier this month by cutting its benchmark interest rate to 13.25% after holding it steady for nearly a year to battle inflation.

In its policy statement, the central bank estimated inflation at 4.9% this year and 3.4% in 2024, in both cases above the official targets of 3.25% and 3%, respectively.

Regarding the current economic situation in Argentina – which is facing historic inflationary woes, dwindling foreign currency reserves and a weakened peso – Campos Neto called it “complex,” adding that people have lost confidence in the country’s currency.

He said Brazil has much to learn from its neighbor’s mistakes, stressing that Argentina’s spiraling inflation is related to the government’s decision to disrespect the central bank’s autonomy and ignore its inflation targets.

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