MercoPress. South Atlantic News Agency

Brazilian annual inflation to September the lowest in nine months

Brazil's Real has lost about 10% versus the US dollar so far in 2013

Annual inflation in Brazil reached its lowest level in nine months, but the country still shows signs it hasn't yet come to grips with persistently higher prices. Brazil's 12-month inflation reading continued to retreat, falling to 5.86% in September, the Brazilian Institute of Geography and Statistics, or IBGE, said Wednesday.

The September reading was the lowest since registering 5.84% in December 2012. Economists had expected 5.85%.

The retreat below the 6% mark could push the Brazilian Central Bank closer to ending its recent rate-raising cycle as tighter monetary conditions take effect. Central bankers have reiterated concerns about a weaker currency on inflation and vowed to stay vigilant in the fight against rising prices.

Brazil's Real has lost about 10% versus the US dollar so far in 2013, causing prices for imported products from wheat and crude oil to jump.

Some economists noted that the 12-month rate was retreating only because of a low basis of comparison from last year. While food and fuel prices remain volatile, indications the US Federal Reserve is moving to end monetary stimulus could cause the Real to lose more ground against the dollar and pressure prices.

Consumer-price growth accelerated in September, rising 0.35% after a 0.24% advance in August, the IBGE said. Economists had expected a rise of 0.34%. Transportation costs led price gains in September on the strength of higher airfares, and prices for home furnishings, clothing and rents also advanced, the IBGE said. Food and drink prices were up slightly month-on-month in September.

Should 12-month inflation continue to decelerate, the retreat would allow the central bank to halt the interest-rate increases before further curtailing already-anemic economic growth in Latin America's largest economy.

Brazil's economy expanded by a stronger-than-expected 1.5% in the second quarter from the first quarter, but many economists expects the expansion to falter in the second half of the year.

Brazil's expected to grow 2.47% in 2013, up from a meager 0.9% expansion in 2012 but well below the 3.5% advance the government had expected.

The IMF in its latest World Economic Report kept Brazil growth forecast for 2013 at 2.5%, as an increase in investment seems to be boosting the economy. However the WEO has downed the estimate for 2014 by seven tenths from the original 2.5%.