Brazil's inflation rate unexpectedly slowed in April and kept far below the official target, suggesting a recent period of currency weakness is unlikely to keep the central bank from cutting interest rates next week.
Brazil's policy makers welcomed an upward revision of the country's growth by the International Monetary Fund, while downplaying the fact its estimate remains lower than others.
Lower power tariffs pulled Brazil's inflation rate below the official target range and even the lowest of forecasts in January. Consumer prices tracked by the benchmark IPCA index rose 2.86% in the twelve months through January, government statistics agency IBGE said on Thursday.
Brazil’s central bank cut its benchmark interest rate on Wednesday to a new low of 6.75%, but hinted it was now done with a historic easing cycle. The bank lowered the Selic rate by 0.25 percentage point, its 11th consecutive cut aimed at helping Latin America’s largest economy emerge from a stifling two-year recession.
The annual inflation rate in Brazil increased to 2.95% in December, from 2.50% in November, rising above economists' projections of 2.80%, but ending the year below the bottom of the central bank's target for 2017, which ranged from 3% to 6%.
Brazil’s central bank cut interest rates to an all-time low on Wednesday and hinted at a smaller reduction early next year, although it said it would be extra cautious going forward. The bank’s nine-member monetary policy committee, known as Copom, cut the benchmark Selic rate by 50 basis points to 7.00%, capping a 725 basis-point decline since October 2016.
Brazil’s central bank has decided to put off any signals about its 2018 interest rate decisions, the bank said on Tuesday, leaving the door open for lower rates next year as the economy recovers with inflation under control.
Brazil’s central bank trimmed its inflation forecast on Thursday and said it expected economic growth to pick up into next year, painting a rosier picture for Latin America’s largest economy as interest rates approach record lows.
Brazilian Central Bank President Ilan Goldfajn said that Latin America's largest economy remains weak though it is on course to show modest growth next year. In an interview with a São Paulo radio station, he said Brazil may achieve growth of 2% in 2018 if the economy continues expanding at its current pace.
Brazil's union federations will hold a second strike on Friday with demonstrations against the government's economic reforms and to demand the resignation of President Michel Temer, who has vowed to approve labour flexibility in the coming weeks.