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Montevideo, November 13th 2024 - 21:14 UTC

 

 

Brazilian 2017 inflation below target for the first time in two decades

Monday, December 11th 2017 - 15:10 UTC
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Economists expected an end to falling food prices after months of declines triggered by a record agricultural harvest. Yet food deflation accelerated in November   Economists expected an end to falling food prices after months of declines triggered by a record agricultural harvest. Yet food deflation accelerated in November

Brazil's monthly inflation eased more-than-expected in November after accelerating in the previous month, mainly due to the continued fall in food prices, preliminary data from IBGE showed on Friday. The consumer price index rose 0.28% month-on-month following 0.42% in October.

 Food and beverage prices dropped 0.38% after a 0.05% decrease in the previous month. The year-on-year increase in the CPI edged up to 2.80% in November from 2.70% in the previous month. Economists had forecast 2.88% inflation.

The year-to-date inflation was 2.50% in November, the lowest since 1998, when it was 1.32%. This means likely that full-year inflation will drop below the official target for the first time in two decades. Brazil targets annual inflation of 4.5% with a tolerance margin of 1.5 percentage points.

This compares drastically with 10.67% inflation in 2015 and 6.29% in 2016.

Most economists had expected an end to falling food prices after months of declines triggered by a record agricultural harvest. Yet food deflation accelerated in the month, effectively putting the year-end inflation target out of reach.

Meeting the official goal would require the index to rise 0.49% in December, an unlikely prospect given a scheduled regulatory cut to power tariffs in the month.

With unemployment at double digits and economic growth tepid, higher electricity rates have been the biggest driver of price hikes in recent months after scarce rains weighed on hydropower generation.

Regulators agreed to lower tariffs in December, which could be partially offset by a sharp increase in cooking gas prices.

Undershooting the inflation target could strengthen calls for more interest rate cuts in 2018 after the central bank dropped its benchmark rate to an all-time low this week.

The bank hinted at an additional, smaller rate cut at its next meeting in February, but urged caution as key fiscal measures still hang in the balance.

Lower rates could help Latin America's largest economy gain momentum after its deepest recession in decades and bolster a long-awaited rebound in corporate investments.

Categories: Economy, Politics, Brazil.

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