What is the IPCA and how is it measured?

The Broad Consumer Price Index, also known by the acronym IPCA, is an indicator used to measure the variation in prices of products and services in a basket for the end consumer. Currently, it is the main inflation rate index in Brazil rate in Brazil, considered the official one by the Federal Government. Its measurement is performed by the Brazilian Institute of Geography and Statistics. This basket evaluates what the population consumes and how much of the family income is spent on each product: rice, beans, bus fare, school material, doctor, cinema, among other items that other items that influence Brazilians’ daily lives. This means that the IBGE not only takes into account the price variation of each item mentioned, but also the weight that this expenditure represents in each family’s budget.

Like other indexes, the IPCA is carried out on a monthly basis. In other words, at the end of each month we know how much the percentage has varied. The IPCA is calculated from the first to the last day of the current month. So, to have access to the IPCA of the effective month, it is necessary to wait until it is finished. Normally, you can find out the value of inflation in the first week of the following month.

What is the Accumulated IPCA?

The accumulated IPCA represents the sum of all the monthly IPCAs made within a certain period. The most common is to use it from January to December of the year you are interested in, for example. Thus, within this period it is possible to determine the annual inflation.

Note below the IPCAs for 2021, 2020 and 2019:

In 2021:

2020:

In 2019: 

How is the IPCA calculated?

IBGE carries out a monthly survey in 13 urban areas in Brazil. There are approximately 430 thousand prices in 30 thousand locations. All these prices are compared with those of the previous month, resulting in a single figure which reflects the general variation in consumer prices over the period. The focal point of this indicator are the goods for consumers and their families, with incomes between one and 40 minimum wages and their expenses in the month. The expenses considered are divided into groups divided into groups which are part of the family budget:

• Food and drink;
• Transport;
• Housing;
• Health and personal care;
• Personal expenses;
• Clothing;
• Communication;
• Household items;
• Education.

Besides the price variation, IBGE considers the weight that each one of these expenses has in the family budget. For example, a family that does not consume red meat and has no school-age children will certainly have a personal inflation index different from the official one, whose calculation places considerable weight on the variation in the price of meat and school fees.

What are the impacts of the index on the economy and investments?

As it is an official indicator of the economy, the IPCA is responsible for saying how much the purchasing power of Brazilian citizens increased or decreased within a period. The IPCA is also an important instrument for the financial market, since various applications use its values as a correction instrument in applications. Furthermore, the IPCA is used to determine the basic interest rate, Selic. It is from this rate that the remuneration of investments or the rates of loans are established. Some of the applications that use this index as a measure are:

• Savings;
• Tesouro Direto;
• Investment Funds;
• Fixed Income Investments;
• Real Estate Credit Bills (LCI).

In other words, you can’t run away from the IPCA!

How can Financeone help you calculate?

To arrive at the final IPCA figure, you need to analyse a range of costs in 13 Brazilian cities. So, FinanceOne will help you not having to search for all these values. To use, it is very simple, fast and intuitive.

• Simply enter the amount to be corrected;
• Then the initial update date;
• And finally, the final update date.

That’s it! Now you have the updated value, in an uncomplicated way.