Cost of living

Extended Consumer Price Index (IPCA) ended last year at 6.29%, the lowest rate since 2013. Food prices helped

Brazil's official inflation closed last year at the lowest level in three years. The Broad Consumer Price Index (IPCA) stood at 6.29% - below the target ceiling (6.5%) and much lower than the result of 2015, when the rate was 10.67%. The price deceleration in 2016 was still the largest in the last decade.

The data are from the Brazilian Institute of Geography and Statistics (IBGE) and were released on Wednesday (11). This result was strongly influenced by the significant drop in prices of important products for Brazilians, mainly food.

With these falls, the IPCA in December, a result known only today, was 0.30% - the lowest result for December months since 2008, when inflation was 0.28%. In the last month of last year, the food group varied only 0.08% compared to November.

The result of the year came even better than expected by the Central Bank. In the latest Quarterly Inflation Report released in December last year, the institution projected a deceleration of the cost of living in Brazil, but to 6.5%, which is the maximum tolerance limit.

Projections for 2017

The BC expects that the cost of living will continue to slow in the coming months. At the end of 2017, the IPCA is forecast to decline to 4.4%, a percentage that if confirmed will cause Brazil, for the first time since 2009, to end the year with inflation below the center of the target.

Items heavily consumed by Brazilians dropped last month. One of the most important was the potato, with a decrease of 16.12%. The list includes carioca beans (-13.77%), mulatto bean (-4.39%), long-life milk (-3.97%), açaí (-3.47%), tomato (-2.04 %), Bar chocolate and bonbon (-1.80%) and meal out of the house (-0.12%).

Cheaper light bill

Outside the food group, the December result was favored by electricity prices, which fell by 3.70%. The IBGE explained that this drop in prices was due to the return of the green tariff on December 1, replacing the yellow, which implied an additional cost of R $ 1.50 per 100 kilowatt-hours consumed.

Also according to the institute, there was an 11.49% drop in energy bills in Porto Alegre (RS), reflecting the reduction of 16.28% in the tariffs of one of the concessionaires, as of November 22. In Rio de Janeiro, the decrease in electric energy (-4.98%) reflected the reduction of 11.73% in one of the local concessionaires, a review that occurred on November 7.