According to Miriam, Guido's agenda is to manage prices.

247 - The main agenda of the Ministry of Finance today is to control prices. This is the argument of journalist Miriam Leitão, from Globo, who sees this as a step backward in the new situation. Read below:

Inflation is putting pressure on - MIRIAM LEITÃO

Inflation is expected to exceed the target ceiling in the coming months, and this is what motivated the tax exemption on basic food items. The government is trying to provide some relief to prices to avoid higher interest rates. Food inflation is in double digits. Prices are rising despite stagnant GDP. Even without the tax exemption, the expectation is that food prices will decelerate throughout the year.

Yesterday, the Central Bank's Focus Bulletin, which collects forecasts from a hundred financial institutions, showed an increase in the inflation forecast for the year, from 5,70% to 5,82%. This reflects the February IPCA (Consumer Price Index), which came in higher than expected. Even though the month benefited from a reduction in energy prices and delays in bus fare adjustments, the rate remained at 0,60%, bringing the 12-month accumulated rate to 6,31%.

Next week, projections are expected to fall, incorporating the tax exemption on basic food items, announced Friday night, with the market already closed. The Finance Minister met with business leaders in the sector yesterday to demand the pass-through of the savings. We're back to a time when the minister's agenda is to manage prices.

For a GDP that grew 0,9% in 2012, inflation has been surprisingly high. The rate has been hovering at the upper end of the band, with episodes of exceeding the ceiling. In September 2011, it hit 7,31%. Now, it is close to the 6,5% limit.

For a country with an extremely high tax burden, tax breaks are always welcome, especially on food. However, according to consultant Alexandre Schwartsman, former director of the Central Bank, tax cuts generally have a temporary effect in the fight against prices. They fall initially, but soon rise again due to demand pressure.

- Inflation is a persistent and widespread increase in prices. These measures have temporary and localized effects. It's like putting a person with a fever under the shower. The fever goes down, but it soon returns if antibiotics aren't given - he stated.

In February, 12-month inflation reached 8,75% in Belém; 8,31% in Fortaleza; 7,44% in Recife; and 7,05% in Salvador. Inflation for those earning up to 5 minimum wages, measured by the INPC (National Consumer Price Index), is at 6,77%, above the ceiling. It reaches 9,24% in Fortaleza and 9,14% in Belém, approaching double digits in these capitals.

The diffusion index, which measures the percentage of items that experienced price increases, stood at 72% in February. The increase is widespread and not concentrated solely in food. Therefore, tax breaks help, but do not solve the problem.

The good news is that food prices are expected to fall throughout the year. This should happen worldwide due to the recovery of harvests in important producing countries, such as the United States and Argentina. Food prices will rise by 13% in March, accumulated over 12 months, but will then begin to slow down. With tax breaks, the reduction will be more intense, but not all of the tax decrease will be passed on to the price. Economists are predicting that at most two-thirds of the decrease will be passed on; the rest should be absorbed to recover profit margins. According to projections by ABC Brasil bank, food prices, which were expected to end the year with a 7,69% increase, will now rise by 5,55%. But this is contingent on a sharp drop in international prices with the new grain harvests.

The persistence of inflation is surprising: there have already been reductions in IPI (tax on industrialized products) for automobiles, white goods, and construction materials; a sharp drop in energy prices; a change in the weighting used to calculate the IPCA (consumer price index); and delays in public adjustments. Even so, it falls and then rises again. Because of all this, the Focus report yesterday raised its forecast for the year's interest rate.