A woman shops at a market in Sao Paulo, Brazil. Sebastiao Moreira (EFE)
The extended national index of consumer prices (IPCA) in Brazil recorded a stronger increase than market analysts had expected. In July, inflation rose 0.12% mom, while the year-on-year increase was 3.99%, according to data released on Friday by Brazil’s Institute of Geography and Statistics (IBGE). This is the first time in a year that inflation has risen in Latin America’s largest economy.
The recovery also comes after the central bank cut interest rates on August 2nd. Brazil’s central bank began gradual hikes in its interest rate, known as selic, three years ago to stem the cost-of-living rise that has hit most countries during and after the Covid-19 pandemic. Seven of the ten goods and services categories recorded higher monthly pressures compared to June. According to IBGE, transport prices saw the biggest price increase, up 1.5% over the last month, while housing, food and beverage prices fell the most.
“The result (0.12%) was above the market consensus of 0.08%,” wrote market strategist Luciano Rostagno of Mizuho Bank in Brazil. “Year-on-year, headline inflation was again above the central bank’s target rate of 3.25% for this year, as the government’s inflation-cutting initiatives last year fell short year-on-year. It is important to note that core, services and food inflation continued to decline on a yearly basis.
“Overall, the data suggests that price pressures eased further in July. However, services and core inflation remain elevated at 5.64% and 5.62% respectively, meaning that the run towards the target remains subject to inflationary risks. “We assume that the central bank will act cautiously in view of lower interest rates,” said the specialist in his customer announcement on Friday.
For his part, President Luiz Inácio Lula da Silva on Friday announced an investment of 1.7 trillion reais ($347.5 billion) as part of the launch of what he called the Accelerated Growth Program (PAC), according to Portal agency.
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