WASHINGTON: Brazil’s annual inflation rate likely dropped slightly in mid-July as a stronger local currency eased the price of imports and a crippling recession dragged down consumer spending in Latin America’s largest country.
Consumer prices likely rose 8.84 percent in the 12 months through mid-July, down from an increase of 8.98 percent in mid-June, according to the median of 23 forecasts in a Reuters poll for the IPCA-15 index BRIPCY=ECI due on Thursday.
Erratic weather in key agricultural states has hit output and pushed up food prices, keeping the 12-month inflation rate from dropping more rapidly.
Worried about high inflation expectations, the central bank is expected to keep its benchmark Selic rate on hold at its rate-setting meeting on Wednesday under the leadership of new governor Ilan Goldfajn. Goldfajn has ruled out rate cuts in the short term and vowed to do whatever is needed to lower inflation to the 4.5 percent center of the official target in 2017.
On a monthly basis, prices probably rose 0.46 percent in mid-July, up from an increase of 0.40 percent the previous month, according to the median of 25 estimates that ranged from 0.11 to 0.51 percent. Still, economists see inflation dropping in annual terms with the economy expected to contract more than 3 percent this year in its second year of recession.
“We see inflation consolidating its downward trend going forward, amid a high (and rising) unemployment rate and a stronger real,” economists with bank Itau Unibanco wrote in a research note on Monday. The real has firmed about 30 percent since its lowest level in mid-January, reducing the cost of imports.
