Brazil closed out 2015 with an inflation rate of 10.67%, up sharply from 6.41% the previous year, the Brazilian Census Bureau (IBGE) said Friday. It was the highest inflation rate since 2002, when the price spiral hit 12.5%. It was also the first time since 2003 for inflation to escape the bounds of the country’s inflation-targeting system. Acceptable inflation under the system ranges from 2.5% to 6.5%. Inflation in 2003 was 9.3%. Under the system, the Brazilian Central Bank must now issue a formal letter explaining failure to meet the 2015 goal along with a plan to pull down inflation in 2016. According to economists, much of the reason for spiraling inflation is government spending. Brazil’s government ran up a primary budget deficit in 2015 estimated at more than R$100 billion. The nominal deficit, which includes interest payments on debt, has been estimated at more than R$400 billion, or about 9% of gross domestic product. The Central Bank hiked interest rates in 2015 in an effort to counter inflation. The base interest rate is currently 14.25%. Many economists expect the Central Bank to order additional rate hikes in 2016 in an effort to pull the inflation rate down to 6.5%.
Link to IBGE release.More Testimonials