Finance Minister Fernando Haddad said he expects Brazil to have positive inflationary surprises this year, but acknowledged that accumulated inflation over 12 months should remain above 4.5% until June, as projected by the Central Bank.
In an interview with GloboNews broadcast late Wednesday night, Haddad assessed that the harvest forecast for the year and the more accommodating exchange rate should contribute to controlling inflation, even surprising economists' projections for rising prices.
“I believe… that we may have surprises in relation to market expectations, as we had in relation to GDP,” said Haddad when asked about inflation.
The harvest expected for this year and the decline of the dollar against the real, which already exceeds 6%, are two factors that could slow down inflation, in the government's view.
“I believe that we can have good news on the inflationary front, if the policy is well conducted, and with the harvest, the behavior of the exchange rate”, we can have pleasant surprises, reinforced the minister.
Haddad predicts inflation above 4.5% until June
At the same time, Haddad stated that inflation in June will “probably” be above 4.5%, as predicted by the BC.
In the minutes of the last Copom meeting, released on Tuesday, the Central Bank assessed that accumulated inflation over 12 months should remain above the target ceiling in the next six months. In practice, this means that inflation should remain above 4.5% at least until June.
The BC's continuous inflation target is 3%, with a tolerance margin of 1.5 percentage points. In December – the most recent data – the accumulated inflation measured by the IPCA was 4.83%, according to the Brazilian Institute of Geography and Statistics (IBGE).
According to the minister, inflation should remain above the target ceiling until the middle of the year. This is because there is a “delay” in the response of prices to the increase in interest rates by the Central Bank.
Currently, the Selic base rate is at 13.25% per year, but technically the effect of higher interest rates on prices has a lag of several months.
“But here in Brazil I believe that the response (of inflation) will be faster. I believe that the adjustment can be faster,” he added. He argued that the interest rate should be a medicine applied by the Central Bank in a “dose that does not kill the patient.”
Income Tax Reform
In the interview, Haddad reiterated that President Luiz Inácio Lula da Silva's intention is to exempt Brazilians who earn up to R$1,000 from income tax. According to him, the government will submit this proposal to Congress. If approved, these workers will no longer have to pay income tax at source as of January 2026.
On the other hand, according to Haddad, Brazilians with incomes above R$50,000 per month do not currently have an income tax withholding considered “compatible”. Therefore, these taxpayers would end up paying a minimum tax.
Earlier, GloboNews had already released an excerpt from the interview with Haddad. In it, the minister defended the collection of a minimum income tax. The proposal applies to people who earn more than R$1,000.
According to the minister, income from salaries, but also from other sources, will be included in the calculation, forming a “combo”.
“There are things that are exempt and will not be taken into consideration. But if a person has an income of more than R$1,400,000 per month, and goes up a ladder to R$1,000,000 per month, we will check whether they are paying a minimum tax,” he said.
Source: Fabricio de Castro | Notícias Agrícolas
