Inflation estimates by Brazilian consumers fall back in January

The average 12-month inflation estimates among Brazilian consumers fell from 9.1% to 7.9% in January.
25 January 2017

The average 12-month inflation estimates among Brazilian consumers fell from 9.1% to 7.9% in January – the lowest rate since January 2015 (7.2%) – according to a survey conducted by FGV’s Brazilian Institute of Economics (IBRE). The 1.2 percentage point (p.p.) drop in the margin represented the highest decrease since the series began in September 2005.

“January’s results reinforce the empirical evidence that consumers’ inflation estimates are strongly linked to the consumer price index accrued in the last 12 months. The reduction was influenced by the accrued CPI in 2016, below the inflation target ceiling, and by extensive media coverage of this unexpected result, shedding light on the government’s concern to control price hikes,” said IBRE economist Pedro Costa Ferreira.

Between December 2016 and January 2017, the ratio of consumers anticipating inflation below the upper tolerance limit of the inflation targets regime (6.5%) grew by 16.5 percentage points, leaping from 16% to 32.5% of the total. Considering different ranges, the highest reduction in the relative frequency of estimates took place in the 10% to 12% inflation range, chosen by 13% of consumers in December and 9.5% in January.

The reduction was widespread across the different family income ranges. Consumers with income over BRL 9,600.00 now expect an inflation of 6.9% for the next 12 months – the lowest value since March 2014 (6.8%).

The complete study is available for download, in Portuguese.