IPCA accelerated to 0.52% in December; Central Bank’s inflation target was set at 3%, with a tolerance of up to 4.5%
01/10/2025
Brazil’s official inflation rate, measured by the Broad National Consumer Price Index (IPCA), accelerated to 0.52% in December 2024, up from 0.39% in November. This brought the IPCA to a year-end increase of 4.83%, according to data from the Brazilian Institute of Geography and Statistics (IBGE). The result exceeded the inflation target ceiling for 2024, which was 3% with an upper tolerance of 4.5%. The 2024 rate also surpassed the 4.62% inflation in 2023.
December’s inflation rate was slightly below the median projection of 0.53% from 34 financial institutions and consultancies surveyed by Valor Data, but it fell within the range of estimates, which varied from 0.29% to 0.60%.
For the full year, the median projection was 4.84%, with estimates ranging from 4.59% to 4.91%.
This marks the third time in recent years that the inflation target has been missed, repeating what occurred in 2021 and 2022. In 2021, the IPCA rose 10.06%, far above the 5.25% ceiling. In 2022, inflation reached 5.79%, also exceeding the target of 5%. In contrast, the 2023 rate of 4.62% was within the target range of 3.25% with a tolerance of 4.75%.
The year 2024 is the last in which the inflation target applies to the calendar year. Starting in January 2025, the target will shift to a continuous system, measuring 12-month inflation on a rolling monthly basis.
Inflation drivers
Among the nine categories of expenses used to calculate the IPCA, housing prices showed a smaller decline, moving from a 1.53% drop in November to a 0.56% decrease in December. Several categories reversed course, including household goods (from -0.31% to 0.65%), apparel (from -0.12% to 1.14%), health and personal care (from -0.06% to 0.38%), education (from -0.04% to 0.11%), and communication (from -0.10% to 0.37%).
Meanwhile, food and beverages slowed their pace of increase (from 1.55% to 1.18%), as did transportation (from 0.89% to 0.67%) and personal expenses (from 1.43% to 0.62%).
Comparing year-end figures, food and beverages—the category with the largest weight in the IPCA—jumped from a 1.03% increase in 2023 to 7.69% in 2024. Household goods rose from 0.27% to 1.31%, and communication saw a slight uptick from 2.89% to 2.94%.
Other categories experienced slower price growth in 2024, including housing (5.06% to 3.06%), apparel (2.92% to 2.78%), transportation (7.14% to 3.30%), health and personal care (6.58% to 6.09%), personal expenses (5.42% to 5.13%), and education (8.24% to 6.70%).
The IBGE calculates the IPCA based on the consumption patterns of households earning between one and 40 times the minimum wage, covering ten metropolitan areas as well as the cities of Goiânia, Campo Grande, Rio Branco, São Luís, Aracaju, and Brasília.
Core inflation
The diffusion index, which measures the proportion of goods and services with rising prices, climbed to 69% in December from 57.8% in November, according to Valor Data calculations. Excluding food, one of the most volatile categories, the index also rose, from 51.7% to 68.9%.
Core inflation, calculated as the average of five components monitored by the Central Bank, increased to 0.58% in December from 0.39% in November, according to MCM Consultores.
On a 12-month basis, the core inflation average rose from 4.21% to 4.34%.
The Central Bank’s inflation target remains at 3.0% for 2024, 2025, and 2026, with a tolerance range of 1.5 percentage points above or below the target.
* By Lucianne Carneiro, Valor — Rio de Janeiro
Source: Valor International