BRASILIA: Brazil’s annual inflation rate probably eased in mid-January to the lowest level since March 2014, a Reuters poll showed on Tuesday, keeping policymakers comfortable to ease interest rates aggressively as they try to avoid a third year of recession. Consumer prices as measured by the IPCA-15 index probably rose 6.06 percent in the 12 months through mid-January, slowing from an increase of 6.58 percent in mid-December, according to the median forecast of 27 economists surveyed. The official inflation target is 4.5 percent, with a tolerance margin of plus or minus 1.5 percentage points. Economists expect inflation to hit the target in the second quarter, which could allow the central bank to cut interest rates from 13 percent currently to single digits this year. Prices probably rose 0.44 percent in the month to mid-January when compared to mid-December, according to the median of 34 forecasts in the poll.
Much of the slowdown in inflation is related to food prices, which had risen sharply in early 2016 due to unfavorable weather, according to UBS economists in a research note. They also mentioned a smaller increase in public transportation fares this year when compared to 2016. “With the new economic team putting the country on the right path, the central bank acting to re-anchor inflation expectations and weather conditions allowing food prices to drop, fundamentals are finally prevailing,” they wrote. Forecasts for the month-on-month rate ranged from 0.32 to 0.58 percent, while estimates for the annual rate varied between 5.78 and 6.40 percent. National statistics agency IBGE will publish the mid-January IPCA-15 data on Thursday at 9 a.m. local time (1100 GMT).
