Brazil’s inflation: down to the wire

It’s
like watching Corinthians fighting it out for this year’s Brazilian
football championship but without the swearing and sweaty punch-ups.

The central bank has been promising for months it will be able to
meet the government’s 2011 inflation target of 4.5 per cent, plus or
minus 2 percentage points. But after many twists and turns,
disappointments and lucky breaks, it looks like we’ll have to hang on to
the very last minute to see whether they can actually pull it off.

Price pressures have eased in Latin America’s biggest economy
recently but 12-month inflation was last recorded at 6.64 per cent in
November – still above the upper ceiling of the target range.

If Alexandre Tombini, Brazil’s central bank president, can’t get
the December figure to 6.5 per cent or under then he faces the
humiliation of having to write an open letter explaining why he messed
up.

Andrés Sanchez, the boss of Brazil’s much-loved boisterous team,
knows how he feels. His guys pulled through at the last, clinching
Corinthians’ fifth Campeonato Brasileiro this month.

But economists aren’t so sure about Tombini’s chances. After months
of indecision, they are once again predicting that 2011 inflation
will come in above the upper limit at 6.52 per cent.

And what a defeat! It would be the first time in eight years that
the central bank had failed to keep inflation within the target range –
a damaging blow to Tombini’s reputation and investor confidence in
a country that was once torn apart by hyperinflation.

However, much will depend on what is going on further
afield. Corinthians’ final game against Palmeiras was actually
pretty disappointing – a goalless home draw in an uninspiring match
during which four players were sent off after a mass brawl. But the club
clinched the title after rivals Vasco failed to get the points they
needed in the final rounds.

Similarly, Europe’s failure to resolve its crisis has given Tombini a
helping hand, slowing Brazil’s growth and bringing inflation down from
its peak of 7.31 per cent a year in September.

But we’ll have to wait until the beginning of January, when we get
the December data, to see if Tombini can swing a last-minute victory
or whether he’ll go down in history instead for breaking his promise
to his fans.