Brazil Faces Surge in Inflation, Straining Lula’s Presidency

Brazil experienced a 1.31 percent rise in consumer prices in February, the highest since March 2022, contributing to a 5.06 percent annual inflation rate. Rising food costs and housing expenses are causing public discontent towards President Lula, whose approval ratings are sinking. The Central Bank plans to raise interest rates to curb inflation, but economists warn this may have limited impact.

Brazil has witnessed a significant surge in consumer prices, with an increase of 1.31 percent in February, marking the highest monthly rise since March 2022. This development escalates pressure on President Luiz Inácio Lula da Silva as annual inflation has now reached 5.06 percent. The rising costs of food, in particular, are causing distress among consumers, pushing the government to seek solutions to alleviate this burden.

In response to the inflation crisis, Brazil’s Central Bank is poised to implement its third consecutive interest rate hike, potentially increasing rates by one full percentage point. This tightening may constrain economic growth, as Brazilians voice their concerns about the economy. “Brazilian inflation picked up in February due to temporary and seasonal pressures… We forecast a 100-basis-point interest-rate hike at next week’s meeting…” stated Adriana Dupita, a Bloomberg economist focusing on Brazil and Argentina.

Housing costs have surged 4.44 percent due to rising utility bills following the expiration of energy credits, making it the primary factor driving inflation in February. Furthermore, education costs increased by 4.7 percent, while food and beverage prices saw a modest rise of 0.7 percent, according to the national statistics agency.

Amidst these elevated inflation rates and increasing interest rates—projected to peak at 14.25 percent—public sentiment towards President Lula is declining. Recent opinion polls reveal that his approval ratings are plummeting to their lowest since he began his current term. The government has introduced initiatives, such as reducing duties on imported food, but many economists believe the effect of these measures will be minimal, with inflation expected to exceed the three percent target for the foreseeable future.

In summary, Brazil is grappling with significant inflationary pressures, which have escalated sharply in February 2023. This situation is prompting urgent responses from the government and the Central Bank, as they seek to mitigate the impact on consumers. President Lula is facing increasing scrutiny and declining approval ratings amid these economic challenges, and while measures have been introduced to alleviate food costs, experts anticipate continued inflation above desired thresholds.

Original Source: www.batimes.com.ar