{"id":92687,"date":"2025-01-27T14:12:01","date_gmt":"2025-01-27T17:12:01","guid":{"rendered":"https:\/\/murray.adv.br\/?p=92687"},"modified":"2025-01-27T14:12:03","modified_gmt":"2025-01-27T17:12:03","slug":"service-inflation-causes-much-more-concern-than-food-inflation","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/service-inflation-causes-much-more-concern-than-food-inflation\/","title":{"rendered":"Service inflation causes much more concern than food inflation"},"content":{"rendered":"\n
Impact of minimum wage also appears in the broad increase of prices linked to freelancers<\/em><\/strong><\/h6>\n\n\n\n

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01\/27\/2025 <\/p>\n\n\n\n

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While the government grapples with how to control food prices, economists are increasingly concerned about the rising inflation in services and other \u201cqualitative\u201d measures. These indicators show trends over which the Central Bank\u2019s monetary policy may have more influence.<\/p>\n\n\n\n

The January mid-month inflation index IPCA-15 \u2014 known as a reliable predictor for official inflation \u2014 rose by 0.11%, surpassing the median expectation of a 0.02% decrease gathered by Valor Data.<\/p>\n\n\n\n

One unexpected positive factor in the month was food prices. The \u201cfood and beverages\u201d category slowed more than economists anticipated, rising 1.06% in the January IPCA-15 compared to 1.47% in the December 2024 preview. Specifically, food consumed at home decelerated to 1.1% from 1.56%.<\/p>\n\n\n\n

A significant portion of this deceleration is attributed to meat prices, a topic of concern for President Lula, which increased by only 1.93% in January compared to 7.91% in the prior month’s IPCA-15. Over 12 months, however, meat prices remain heavily pressured with a 20.65% inflation rate, though they have stabilized relative to the full December 2024 Extended Consumer Price Index (IPCA).<\/p>\n\n\n\n

Food consumed at home saw a one percentage point relief from the previous month, reaching 7.75% over the 12 months leading up to the January preview, while the \u201cfood and beverages\u201d group decelerated to 7.49% from 8%. Nonetheless, these figures remain above the general index, which has increased by 4.5% and is now temporarily within the upper tolerance limit of the year’s inflation target\u2014down from 4.71% in the December preview.<\/p>\n\n\n\n

Without the \u201cItaipu bonus\u201d that caused a 15.5% drop in residential electricity prices in January’s IPCA-15, the inflation preview would have been closer to 0.7%, and over 12 months, around 5%, noted Mirella Hirakawa of the consultancy Buysidebrazil. This figure would more closely resemble 2021, when inflation closed the year at 10% following the pandemic shock.<\/p>\n\n\n\n

This temporary effect on energy concealed clear signs of inflation acceleration in January\u2019s preview. More importantly, from the perspective of analysts and the Central Bank, all qualitative measures accelerated between December 2024’s IPCA-15 and January 2025’s.<\/p>\n\n\n\n

Services accelerated to 0.85% from 0.64%, significantly above the market\u2019s expectation of around 0.36%. This was a reacceleration, as they had decreased from a 0.72% rise in November. An important factor was airfare prices, which rose by more than 10% in the January preview, contrary to economists\u2019 expectations of a decrease.<\/p>\n\n\n\n

Nonetheless, core services, excluding volatile items such as airfare, accelerated to 0.96% from 0.71%. This is the highest level since May 2022 (0.98%), according to the MCM series. Over 12 months, core services increased to 5.95% from 5.66%, the highest value since June 2023, 6.53%.<\/p>\n\n\n\n

A significant portion of this “qualitative” inflation has been fueled by an overheated domestic economy and the support of household disposable income, driven by factors like a tight labor market and a 7.5% increase in the minimum wage.<\/p>\n\n\n\n

The impact of the minimum wage also seems evident in the widespread price increases of services linked to \u201cfreelancers,\u201d such as dentists (1.6%), psychologists (1.2%), seamstresses (1.2%), and manicurists (2.3%).<\/p>\n\n\n\n

Tatiana Pinheiro, chief economist at Galapagos Capital, believes that if monetary policy is effective, it will help control part of the exchange rate pass-through from wholesale to consumer prices and keep the 2025 IPCA at a level similar to the end of 2024. This would be a significant achievement, as the shift from an exchange rate of R$5 per dollar to R$6 is no trivial matter.<\/p>\n\n\n\n

However, for this to happen, fiscal policy\u2014which is under the government\u2019s control\u2014needs to cooperate. Without new actions in this area on the horizon, the perception is that, at least in terms of inflation, 2025 is starting much like 2024 ended: with concerning and worsening signals.<\/p>\n\n\n\n

*By\u00a0Ana\u00efs Fernandes\u00a0\u2014 S\u00e3o Paulo<\/p>\n\n\n\n

Source: Valor International<\/p>\n\n\n\n

\nhttps:\/\/valorinternational.globo.com\/\n<\/div><\/figure>\n","protected":false},"excerpt":{"rendered":"

Impact of minimum wage also appears in the broad increase of prices linked to freelancers 01\/27\/2025 While the government grapples with how to control food prices, economists are increasingly concerned about the rising inflation in services and other \u201cqualitative\u201d measures. These indicators show trends over which the Central Bank\u2019s monetary policy may have more influence. 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