Inflation slows in Brazil due to the economic crisis and the truck drivers strike

Inflation fell from 4.83% to 3.84% in the accumulated of the last 12 months. However, this drop was mainly caused by the truck drivers' strike in 2018 and the economic slowdown that brought down consumption within the country.

Thus, inflation in Brazil, which had accelerated in the first four months of 2019, seems to be giving a truce in the last two months, according to data released by IBGE. After the scares of March and April, when the IPCA, official index of inflation, reached 0.75% and 0.57%, respectively, in May the rise slowed to 0.13%.

As a result, the National Monetary Council (CMN) decided to lower the inflation target by 3.5% to 2022. The target will have a tolerance interval of 1.5 percentage points, more or less, and the inflation target will be considered fulfilled if the index stays between 2% and 5%.

According to the G1 website, between 2005 and 2018, the inflation target in Brazil "was maintained at 4.5%. In the following years, it was reduced by 0.25 percentage points each year, from 4.25% in 2019 to 3.75% by 2021."

Now, the Brazilian Central Bank should seek even lower inflation. The mistake of the government here is to present absolutely no policy to combat the economic stagnation and the unemployment that reaches millions of people. As a result, this situation is likely to persist in the coming months.

An alternative to this would be to keep the inflation target at 4.25% and reduce interest rates to try to stimulate investment, but even now, this seems insufficient because of the government's delay in presenting any plan to change this scenario of economic stagnation.