By William Jones, Contributing Reporter
RIO DE JANEIRO, BRAZIL – The price in goods such as gas and electricity will follow an unpredictable path according to the latest inflation report published by the Brazilian Central Bank. The report states that consumers should expect a 7.5 percent increase in electricity rates this year, as they also recognized that gasoline prices so far this year have risen by 0.6 percent up to February.
Brazil’s Central Bank increased its 2014 inflation forecast to 6.1 percent from its previous estimate of 5.6 percent, which could damage President Dilma Rousseff’s bid in this year’s general election, especially due to the government’s 4.5 percent inflation target, a benchmark that is quickly drifting out of their grasp.
One of the key reasons for the uncontrollable prices is due to one of the biggest droughts in recorded Brazilian history, causing an increase in the cost of living in areas.
“Our outlook does not envisage inflation slowing toward the target midpoint,” said Carlos Hamilton Araújo, the Central Bank’s economic policy director at a news conference. The bank also said there is a forty percent chance that inflation will surpass the two percent margin for error of 6.5 percent.
This month the government announced a distribution of US$8 billion for electric companies to pay their debts with their generators as the payment acts as compensation to consumers due to the increase in rates. Such policies have led to a lack of faith in the country’s credit rating.
In its quarterly inflation report, the bank also raised its estimate for inflation in 2015 to 5.5 percent,up from 5.4 percent, spelling out a continuation of harsh times for the Brazilian economy. Araújo also added that food inflation, caused by the erratic weather earlier in the year, will pick up through May but promised it will readjust itself downwards in June.
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