Brazil announced it will scrap federal taxes on certain food staples and toiletries, the latest in a series of measures to curb prices after a surprise jump in inflation in February triggered alarm bells.
Inflation rose more than expected last month despite a government-sponsored cut in electricity rates, raising prospects of an interest rate hike even as policymakers fret about a sluggish economy.
Brazil's benchmark IPCA consumer price index rose 0.60% in February, statistics agency IBGE said on Friday. The index had risen 0.86 percent in January.
Hours after the data was released, President Dilma Rousseff said in a television address that tax breaks on household staples should lower the price of products by between 9.25% and 12.5% percent. She also added three toiletry items to the list of 13 products in the basket of goods, which includes beef and beans, deemed essential for a Brazilian family to live for a month.
I don't overlook inflation controls for a single moment because economic stability is crucial for all of us, said Rousseff, adding that the move will cost her government 7.4 billion Reais (3.8 billion dollars) in tax revenues a year.
”That's why I don't stop looking for new ways to reduce the cost of life of Brazilians and protect their purchasing power”.
The president’s comments are a clear indication that the government is shifting its focus from the slow recovery to high inflation, which could not only hurt the economy, but also Rousseff's re-election bid next year.