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Why Is Inflation So High in Brazil?

'Indexation' increases costs of everything from electricity to healthcare, and contributes to Brazil's status as having the highest inflation persistence of any emerging market.

By David Biller, Bloomberg | Updated on January 12, 2016

Why does Brazil’s inflation stay so stubbornly high despite even more interest-rate hikes in the horizon? The one-word answer is indexation.

A vestige of the country’s hyperinflation period in the 1990s, when annual price gains reached heights above 6,000 percent, indexation was meant to protect Brazilian companies and citizens from depreciating purchasing power by linking costs such as wages to inflation.

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