Inflation in Brazil extends its downward trend in mid-September due to lower fuel prices

Inflation in Brazil extends its downward trend in mid-September due to lower fuel prices

By Gabriel Araujo

Sรฃo Paulo (Reuters) – Consumer prices in Brazil extended their downward trend in the month to mid-September, as fuel costs continued to fall on the back of lower taxes and price cuts by the state oil company, state statistics agency IBGE said on Tuesday. Petrobras.

The domestic IPCA-15 index fell 0.37% in the month to mid-September, a deeper drop than the 0.2% forecast by analysts polled by Reuters, although slowing from the 0.73% drop seen the previous month.

Inflation in the 12 months to mid-September was 7.96%, well below economists’ expectations of 8.14%, likely supporting the central bank’s recent decision to halt its aggressive rate-raising cycle.

Also in August, when Latin America’s largest economy recorded its lowest mid-month inflation rate in nearly three decades, this month’s drop was driven by the transportation sector, where costs fell 2.35%, IBGE said.

In addition to the tax cuts announced by the energy country earlier this year, oil giant Petroleo Brasileiro SA has slashed refinery gasoline prices twice since mid-August, driving down prices at the pump.

However, the fall in inflation in September was not widespread as prices fell in only three of the nine groups of products and services surveyed, the IBGE said – telecommunications, food and beverage and transportation.

She pointed to the high prices of clothing, health care and housing in this period.

Andres Abadia, chief Latin American economist at Pantheon Macroeconomics, said the new figures provided further evidence that inflation is slowing quickly thanks to the impact of taxes and the lagging effect of monetary tightening.

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โ€œThe underlying pressures remain relatively high, mostly due to the resilience of domestic demand, but we expect economic growth to ease over the coming months.โ€

The latest inflation data comes as Brazil’s central bank last week opted to keep interest rates unchanged at 13.75%, pausing a severe tightening after 12 consecutive increases aimed at curbing high inflation.

Tuesday’s meeting minutes showed most MPC members concluded that inflation expectations support the end of the tightening cycle, even though the “remaining” rate hike was “widely discussed”.

William Jackson, chief emerging markets economist at Capital Economics, said inflation figures confirmed that the monetary tightening cycle is over.

“(But) the fact that inflation remains very strong (especially outside the food and energy categories) supports our view that the central bank will wait until the middle of next year before turning to rate cuts.

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