The bugbear of Brazil

The Economist, 1/16/2014

THE year did not begin well for Dilma Rousseff. The real ended 2013 one-third weaker against the dollar than when she took office as Brazil’s president three years ago. Car sales were down for the first time in a decade. More dollars flowed out of the country than at any time since 2002.

Most perniciously, on January 12th the bean-counters announced that inflation hit 0.92% in December, the highest monthly rise in ten years. That pushed the annual figure to 5.91%, above market expectations. The jump prompted the Central Bank to raise the main interest rate on January 15th, not—as analysts had long forecast—by a quarter of a percentage point, but by half a point, to 10.5%.

Inflation is a Brazilian bugbear. The economic costs are clear: high inflation hits both the poor, struggling to make ends meet, and the indebted middle classes as interest rates rise. But it is also a political issue. Most adults recall the hyperinflationary era of the early 1990s, when shopkeepers would adjust prices each morning, and then change them again in the afternoon.

Read more…

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s