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Brazil Inflation Seen Steady in Mid-August on High Food Prices

An inflation rate of 4.7 percent is the official target

A view of Rio de Janeiro, Brazil, photo: Wikipedia/Poswiecie
By Reuters Whatsapp Twitter Facebook Share
1 year ago

BRASILIA, Brazil — Brazil’s inflation rate likely remained around 9 percent in the 12 months through mid-August, far above the official target but probably still on track to ease in coming months as the recession grinds on, economists said in a poll on Monday.

Consumer prices, as measured by the IPCA-15 index, probably rose 8.97 percent in the 12 months through mid-August, nearly unchanged from the 8.93 percent seen in mid-July, according to the median of 19 forecasts.

On a monthly comparison, prices probably rose 0.47 percent, down from an increase of 0.54 percent in mid-July, according to the median of 20 estimates for the indicator due on Wednesday.

The official inflation target is 4.5 percent, a goal not achieved since August 2010 as government spending soared under the administration of suspended President Dilma Rousseff.

The central bank has pledged to slow price increases at least to the top end of the tolerance range at 6.5 percent by the end of this year, as it seeks to restore investor and business confidence in Latin America’s largest economy.

Their strategy has been to keep interest rates at their highest in a decade, at 14.25 percent, even as the country struggles with its most severe recession in probably more than a century.

“A hiccup in food prices has pressured inflation in the last months, but we believe these pressures are temporary and that the disinflation process will continue,” economists with Itau Unibanco said in a research note.

UBS economists led by Rafael de la Fuente acknowledged inflation has not eased as rapidly as they expected, but said price rises are still likely to reach 4.7 percent in 2017.

“We continue to hold the view the economic recession coupled with a rising unemployment rate will continue to weigh on services and core inflation,” they wrote in a report.

Estimates for the month-on-month inflation rate ranged from 0.30 to 0.55 percent, while forecasts for the 12-month rate were between 8.79 and 9.06 percent.



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