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First quarter inflation retreats to lowest level since 1994

Inflation 2017

Data released by IBGE show that the accumulated inflation in the first three months of the year is the lowest since the creation of the Real Plan

As a result of economic reforms, the cost of living of Brazilians has fallen in recent months. In the first quarter of this year, official inflation reached its lowest level since the beginning of the Real Plan in 1994. 

Between January and March, the Extended Consumer Price Index (IPCA) closed at 0.96%, a level unprecedented for the first quarter. Last month, the price hike was 0.25%, the best level in five years. 

Faced with the improvement in confidence indicators and the trend of falling interest rates, accumulated inflation in the last 12 months also slowed considerably, from 4.76% to 4.57%. Now inflation is even closer to the Central Bank's target of 4.5%.

In the month, contributed to the favorable result the decrease of 0.86% in the transport price. Main factor for the reduction in inflation of this item, the cost of air tickets dropped 9.63%. Another group that influenced this performance was the one of communication, that fell 0.63%, pulled by the fall in the prices of fixed telephony. 

What is IPCA

The IPCA has been calculated by IBGE since 1980 and measures the country's official inflation. For the calculation of the index of the month, the prices collected in the period from February 25 to March 29, 2017 (reference) were compared with the prices in effect in the period January 31 to February 24, 2017 (base) .

Why should inflation be controlled?

Given the scenario of hyperinflation faced by Brazil in the 1980s and early 1990s, the Real Plan was created in 1994 to stabilize the Brazilian currency and stabilize the economy. With prices under control, there is more confidence and more income for the population.

High rates of inflation subtract wages and reduce the growth potential of the economy, as well as reduce investment and jobs. For this reason, the Central Bank's main mission is to pursue an inflation target, currently set at 4.5% per year.

Source: Portal Brasil, with information from IBGE