The Lula government announced the expansion of the tax benefit for gasoline and ethanol, plus an extra subsidy of R$ 1 for diesel, amid pressures and instability in the fuel market. The measure has the potential to reduce pump prices and impact official inflation, the IPCA, ahead of the electoral period.
According to the inflation strategist at Warren Investimentos cited in the article, the expansion of the benefit can reduce IPCA by approximately 0.15 percentage points. Although the impact is considered small, market participants and government officials see some disinflationary effect in a scenario of inflation around 5% forecasted for this year.
The federal government uses the expedient of acting on fuel prices to try to secure votes at a time of difficulty in polling numbers. The strategy resembles what former President Jair Bolsonaro did in the 2022 election, when he removed taxes on the products amid a rising oil environment, in a more moderate way and without pressuring the states.
