CEIC Insight - New FGV Data Provides In-Depth Analysis of
Brazil’s Inflation Dynamic

Brazil saw a substantial decline in inflation rate between April and August 2020, when many business activities were subdued due to the COVID-19 pandemic. This allowed the central bank to expand the monetary relief programme that started a year earlier. The central bank cut the key interest rate SELIC gradually to a record low of 2% in August 2020. To avoid a significant decrease in households’ income, caused by a struggling labour market, the federal government put aside its fiscal austerity programme and increased expenditures by more than BRL 524bn (around 7% of GDP) as of December 31, 2020. The bulk of it (56%) was spent on the emergency aid – an income transfer programme to assist unemployed, informal and self-employed workers affected by the pandemic.

In order to monitor the growing inflationary process we added the dataset of the Getulio Vargas Foundation (FGV) – a new addition to Brazil Premium Database – which contains the following series on inflation:

• The Producer Price Index IPA-M monitors prices of agricultural and industrial products in corporate transactions, that is, at stages preceding households’ consumption.

• The Consumer Price Index IPC-BR-M calculates average price variations of goods and services demanded by families with incomes up to 33 times the national minimum wage in seven major cities in the country.

• The National Construction Cost Index INCC-M monitors house construction costs

• The General Market Price Index IGP-M is an overall indicator of price movements which considers different stages of the production process. It is a weighted average of the IPA-M, the IPC-BR-M and the INCC-M.