What is driving Brazil’s food price inflation?
There is little doubt that Brazil’s rising food inflation has a lot to do with global forces, as international prices for food-related commodities go up, even though currency appreciation has helped to cushion the blow somewhat in local currency terms. More broadly, there is empirical international evidence suggesting that global factors have become a more important driver of inflation than domestic factors nowadays in several countries. Wholesale price inflation is on the rise too, and will keep the central bank concerned about pass-through into CPI inflation from pipeline pressures. Agricultural WPI is typically more volatile, and has already jumped close to the 30%Y mark, from negative terrain a couple of years ago. Perhaps equally relevant for the central bank, however, is the recent rise in industrial WPI, mainly reflecting rising global commodity prices (such as for iron ore), besides oil-related pressures, such as on fertilizers and diesel oil. Our estimates suggest that pass-th
