Investor Presentaiton
Annual Report
AR
2022
SUMMARY
WHO WE
ARE
Stability of the Currency Purchasing Power
The year of 2022 was challenging from a monetary policy
standpoint. The year-over-year (YoY) inflation rate, measured
by the IPCA, reached 5.79% in December, above the upper
limit of the tolerance interval (5%). Some factors were
especially relevant to explain the behavior of inflation.
11%
12-month inflation
12.13%
8%
OUR
STRENGTH
5%
AND
OUR
RESOURCES
2%
December
2021
April
2022
OUR
RESULTS
target
accomplished
5.79%
December
2022
Inertia had an important contribution to inflation in 2022
due to the high inflation in 2021 of 10.06%, affecting both
market and administered prices inflation. In the case of
market prices, past inflation means current costs pressure,
arising both from other prices of goods and services used
as inputs and from informal inertial mechanisms of wage
indexation. For example, adjustments in wage negotiations
tended to follow past inflation, although to a lesser extent,
for much of the year. In the case of administered prices,
institutional arrangements link the adjustment of prices to
past inflation, especially in the case of health insurance and
drug prices.
The rise in commodity prices, especially oil, also affected
2022 inflation, especially in the first half of the year, and
acted indirectly in 2022 through the high impact on 2021
inflation. Commodity prices fell in the second half of
2022, influenced by the perspective of world economic
deceleration and the rebalancing of grains supply. Even so,
in general, price levels at the end of 2022 were still above
those of late 2021, except for metal commodities.
Imbalances between demand and supply of inputs
and bottlenecks in global supply chains were another
determining factor. These pressures reflected changes in
consumption patterns caused by the pandemic. There was
a proportionally greater share of demand directed toward
goods, driven by expansionary policies. As for 2022, these
pressures were aggravated by the outbreak of war in
Ukraine. These developments, which occurred on a global
level, generated excess demand over short-term supply for
several goods, causing an imbalance in several countries and
sectors.
Food price shocks are also one of the main reasons to explain
2022 inflation. These shocks resulted from climate issues,
the recovery in the employment level, and the recovery in
the demand for services.
Conversely, several factors contributed to reducing the
deviation of inflation from the target. An important event
that contributed to a lower 2022 inflation compared with
2021 were the tax measures involving fuels, electricity,
and telecommunications. In April 2022, due to the rainfall
improvement, the water scarcity flag effective since
September 2021 was replaced by the green flag, which
also contributed to reducing inflation. The exchange rate
partially counterbalanced the increase in commodity prices.
The exchange rate appreciated in the first months of 2022
and, although it depreciated afterwards, it still reached, in
2022Q4, a 5.9% lower average compared to the same period
of the previous year.
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