The federal government will gradually withdraw fuel subsidies if the price of oil stabilizes around US$80 per barrel. This assessment was made by the executive secretary of the Ministry of Finance, Rogério Ceron, in an interview with Reuters on Wednesday (17). According to the secretary, the next 30 days will be crucial to assess the effects of the de-escalation of tensions in the Middle East on energy markets and inflation expectations. “If the price stabilizes around US$80 per barrel, there will be no need to maintain these measures. We will withdraw them prudently,” said Ceron. The government is closely monitoring the peace negotiations between the United States and Iran, hoping that a definitive agreement will contribute to the normalization of navigation in the Strait of Hormuz, a strategic route for global oil trade. According to Ceron, a reduction in geopolitical tensions tends to alleviate inflationary pressures and open space for the continuation of the cycle of interest rate cuts by the Central Bank. The authority stressed, however, that caution is necessary given the recent volatility observed in oil prices, exchange rates, and financial markets. The secretary also highlighted that some of the pressure caused by the rise in oil prices was offset by the appreciation of the real against the dollar. According to him, the Brazilian currency has risen from approximately R$ 5.20 to close to R$ 5.00 per dollar since the beginning of the conflict. In the economic team's assessment, the recent increase in inflation projections is directly related to the effects of the war on energy prices. "If we exclude the impact of the war, there is no significant inflationary pressure," Ceron stated.
This text was translated by machine from Brazilian Portuguese.