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Brazil inflation hits 18-year low, below all forecasts

Brazil inflation low
LatAm   Recent improvement in the labor market

Brazilian inflation hit a fresh 18-year low in August due to an abundant harvest, undershooting all estimates and giving plenty of room for the central bank to keep cutting interest rates.


The IPCA consumer price index rose 2.46 percent in the 12 months through August, statistics agency IBGE said on Wednesday. The annual inflation rate came in below even the lowest forecast in a Reuters survey of 23 economists.

The reading suggests that recent improvement in the labor market and consumer spending have yet to generate substantial price pressures, a welcome development as Latin America’s largest economy emerges from its deepest recession in a century.

Inflation slowed in sectors closely tied to the pace of economic activity, such as healthcare, education and discretionary consumer spending.

Consumer prices rose 0.19 percent from July, slowing from the 0.24 percent rate seen in the previous month.

The 12-month inflation rate has fallen well below the bottom end of the central bank’s target range of 4.5 percent plus or minus 1.5 percentage point for months, allowing the central bank to cut interest rates to the lowest levels since 2013.

 

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