Inflation In Brazil Exceeds 5% In 12 Months

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Inflation in Brazil reached 5.19% in the 12 months to September, with a monthly price increase of 0.26%, the Brazilian Institute of Geography and Statistics (IBGE) reported this Wednesday.

In August, 12-month inflation reached 4.61%.

September was the third consecutive month in which the Broad Consumer Price Index (IPCA) increased. In July, the IPCA recorded its first monthly increase in a year.

With these data, until now in 2023, prices in the largest economy of Latin America have increased by 3.5%.

The increase in September was explained by the increase in fuel (2.80%), which mainly affected the transport sector (+ 1.40%).

“Fuel is the subitem with the greatest weight in the IPCA. With this development it ends up contributing greatly to the result of September,” said André Almeida, IPCA manager at IBGE.

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There was also an increase in prices in the housing sector (0.47%), mainly due to the increase in electricity bills.

On the other hand, the food and beverage group recorded four consecutive months of decline with a decrease of 0.71% in September.

“The result is very good and reiterates a better vision of monetary policy that should continue,” said economist André Perfeito in a note, stressing that the IPCA in September was lower than projections in the market.

Due to better inflation data, the Central Bank of Brazil decided in August to lower the reference interest rate (Selic) for the first time in three years.

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The central bank keeps the reference very high in an attempt to make credit more expensive to discourage consumption and investment, and thus cool the economy to lower pressures on prices.

After two consecutive cuts of 0.50 percentage points, the interest rate stands at 12.75%, and the BCB plans to continue with the same reduction.

The government of Luiz Inácio Lula da Silva has insisted since taking office in January on a rate cut that makes credit cheaper.

The Brazilian market projects that the country will end 2023 with inflation of 4.86%, according to the latest survey of the Focus market, released on Friday by the Central Bank.

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