Alckmin defends the removal of electricity from the calculation of inflation to adjust interest rates

Vice President suggested that the Central Bank evaluate this possibility, citing as an example the model adopted in the USA
Alckmin defends the removal of electricity from the inflation calculation to adjust interest rates
Photo: Fabio Rodrigues-Pozzebom/Agência Brasil

With information from Reuters Agency

The Vice President of the Republic and Minister of MDIC (Development, Industry, Commerce and Services), Geraldo Alckmin, defended this Monday (24) that the prices of electricity and food be disregarded in the calculation of inflation to allow more precise adjustments in the basic interest rate, Selic

The statement was made during an event promoted by the newspaper Valor Econômico, in São Paulo. Alckmin suggested that the Central Bank evaluate this possibility, citing as an example the model adopted by United States, where two main indexes are used to monitor inflation: the full index (headline inflation) and underlying inflation (core inflation).

Core inflation disregards the electricity and food sectors as they are highly volatile items, affected by external factors such as climate and geopolitical conflicts.

For Alckmin, the adoption of a similar methodology in Brazil would allow the Central Bank to make monetary policy decisions with more stability and focus on core inflation.

“I think it is a smart measure to actually increase interest rates on those that can be most effective in reducing inflation,” said the vice president. “I do understand that it is a measure that should be studied by the Brazilian Central Bank.”

Alckmin also commented on the current level of the Selic rate, currently at 14,25% per year, classifying it as an obstacle for the economy, although he acknowledged that inflation control is essential.

In February, the country's official inflation, measured by the IPCA (Broad National Consumer Price Index), rose 1,31%, after rising 0,16% in January, according to data from the IBGE (Brazilian Institute of Geography and Statistics). 

The result represents the largest variation for the month since 2003, when the index was 1,62%. The main factor for the increase in the month was the price of residential electricity, which rose 16,8% compared to January. 

Electricity bills soar, pushing February inflation to its highest level since 2003

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Photo by Henrique Hein
Henrique Hein
He worked at Correio Popular and Rádio Trianon. He has experience in podcast production, radio programs, interviews and reporting. Has been following the solar sector since 2020.

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