The market is already experiencing inflation at 7% and silicate up to 14% with the war in Ukraine and high oil prices

Predictions for economic inflation This year it has already reached 7% (double the target center for this year) due to the upside petroleum And food because of the war between Russia And the Ukraine. From the start of the standoff until last Tuesday, the CRB index, which measures global commodity inflation in dollars, is up 15.2%. A consulting firm expects raw material dollar prices to rise by as much as 25% in 2022, exacerbating inflation and expanding efforts to contain prices. The market is seeing the base rate, currently at 10.75% per annum, above 13% at the end of the high cycle, and potentially as high as 14%.

As a result of the war, the Bank of America (BofA), for example, was the institution that did the largest revision of inflation expectations for the year: it increased by one and a half points, from 5% to 6.5%, which is the forecast. From Broad Consumer Price Index (IPCA). BNP Paribas stock rose from 6% to 7% and is on top of the IPCA forecast for 2022 along with Credit Suisse, which increased from 6.2% to 7%. Credit put upward biased in the projection, should there be a full-fledged fuel price adjustment, a scenario the bank has not yet anticipated.

David Baker, head of economics for Brazil and strategy for Latin America at Bank of America, cites the increase in fertilizer and food prices to review inflation. “We estimate that the full impact of the increase in grain prices should be felt towards the end of the first half of 2022 on the IPCA, and we revised our year-end food inflation forecast to 11%, from 7.5% before,” he says. , in the report.

Julia Bassaboom, an economist at Itaú Unibanco, states that the impact of the conflict on supply chains is very significant. Russia accounts for 11% of oil exports and, along with Ukraine, has 28% of wheat and 20% of corn exports. “This drawdown in the CRB index in recent days reflects the impact of the war on the global production chain.” This week, a bank that forecast an IPCA of 5.5% should revise that number upward at the expense of the rise in food and fuel. Faced with doubts, the economist sees the possibility of a barrel of oil reaching $200 in the short term. But it is not the most likely scenario.

Bruno Imaizumi, an economist at LCA Consultores, says his consulting firm’s forecast of 6% inflation for this year is being challenged every day the struggle continues. “It is a 6% scenario, with a strong bullish slope.” He argues that with supply and demand problems of various raw materials, driven by oil and grain, but also involving important industrial minerals, price imbalances in global production chains are growing.

“Global inflation is deflation,” says economist Fabio Silvera, partner at consultancy MacroSector. The CRB index in their account should rise 25% this year. This commodity inflationary pressure should push the US to raise interest rates and in Brazil the base rate could rise to 13% at the end of the cycle, even as the dollar drops to nearly $5.

Selic

Currently, most economists surveyed before Estadao / broadcast Still hoped that at next week’s meeting to Monetary Policy CommitteeOh central bank Choose an increase of 1 percentage point in SelicFrom 10.75% to 11.75% annually, which would already be the highest level in five years. But there is already a longer cycle of increases than previously expected, with interest rates coming in at more than 13%.

For Garde Asset’s chief economist, Daniel Weeks, BC should also increase Selic by one percentage point next week. With the changing landscape created by the war, the greatest risk is one point higher than a narrowing of 1.25 points, he says.

At the end of the cycle, Weeks is currently forecasting 12.75%, but he admits that the chance of BC breaking this level has increased significantly. “It could be higher than 13%. And it probably would take longer to fall off. It could be close to 14%. The asymmetry is all that. What would the value of the oil be? $120, $150, $200? Nobody knows.” ” / MÁRCIA DE CHIARA, CÍCERO COTRIM, THAÍS BARCELLOS, FRANCISCO CARLOS DE ASSIS, EDUARDO LAGUNA