by Gabriel Araujo
SAO PAULO (Reuters) – Brazil’s IBGE statistics agency said consumer prices fell this month through mid-August as fuel prices fell due to tax cuts, it said on Wednesday.
Brazil’s IPCA-15 index fell by 0. 73% compared to 0.13% in the previous month, also maintained for the whole month of July Reported downtrend.
This is the lowest recorded since mid-month inflation was measured in November 1991. Economists polled by Reuters had expected a steeper decline of 0.81%.
As transport prices continue to fall, Brazil reports the figure is in deflationary territory, supported by federal legislation to cut fuel taxes and new price cuts by state oil company Petrobras.
Lower fuel prices are seen as key to President Jair Bolsonaro’s prospects for re-election in October. The far-right incumbent is trailing former left-wing president Luiz Inacio Lula da Silva in opinion polls.
According to IBGE, transportation costs fell by 5.24% Gasoline and ethanol prices fell during this period, but were partly driven by soaring Milk prices were offset by a 1.% increase in food and beverage costs.
Kimberley Sperrfechter, Emerging Markets Economist at Capital Economics, said that headline rates obscure the fact that, driven by non-energy categories, potential Price pressure remains strong.
Inflation reached 9.6% in the months to mid-August, while the market expected It was 9.5%, still well above the central bank’s target of 3.5%, plus or minus 1.5 percentage points.
Central bank governor Roberto Campos Neto said on Tuesday that inflation will hit 6.5 percent or “slightly lower” this year, but noted there will be “rewards”” in 2023 as some government measures expire in December.
Brazil’s central bank has raised its key interest rate from a record low of 2% to 13.75% March2021, but shows that aggressive tightening may Stopped in Sept.
Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, noted that inflation expectations follow the most recent
But Capital’s Sperrfechter said the overall picture shows strong core price pressures and growing fiscal risks make the final 25 Basis point rate hikes are possible, along with prolonged monetary tightening.
Earlier on Wednesday, Mexico reported that inflation was still on an upward trend, sparking calls for further rate hikes.