Consumer prices in Brazil fell more than expected in the month through mid-July, which could open the way for a strong rate cut, Brazilian statistics agency data “IBGE” showed.
Brazil’s consumer price index, IBCA-15, fell 0.07% in the month to mid-July, down from 0.04% in the previous month and less than the 0.01% decline estimated by economists polled by Reuters.
This pushed the country’s 12-month inflation rate up to 3.19%, while economists expected it to reach 3.26%.
The annual figure remains below the central bank’s inflation target of 3.25% for the year, although a pickup is expected this month due to headwinds.
In order to battle inflation, Brazil’s central bank performed one of the world’s most severe monetary tightening cycles, adding 1,175 basis points in rises between March 2021 and August 2022.
With that work largely done, the easing cycle is widely expected to begin next month, but economists still disagree about the size of the cut. While some are betting on a 25 basis point cut, others expect a 50 basis point move.
Brazil’s statistics agency said the contraction in the month through mid-July was mainly driven by lower housing costs and food and beverage costs, whose declines were partly offset by an increase in transportation prices.
