Mid-April inflation below forecasts, but widespread

The Brazilian Institute of Geography and Statistics has released its latest mid-month inflation index. There is some good news: the data suggests that prices are continuing to slow down in the country. The IPCA-15 index rose by 0.57 percent in the first half of the month, below both March results and the median forecast in a Reuters poll.

In 12 months, the index eased from 5.36 percent in March to 4.16 percent this month.

Another positive insight from the data is that food prices have decelerated, rising a meager 0.04 percent after a 0.2 percent jump in the previous month, as eating at home has become less expensive.

The bad news is that all segments and regions surveyed recorded price bumps. 

The biggest hikes came in some of the areas that hurt consumers the most, such as transportation and healthcare. 

Since March, transportation costs have risen due to the end of federal tax exemptions on fuels, which had been enacted during the previous Jair Bolsonaro administration in an unsuccessful attempt by the former president to win re-election by creating feel-good factors in the economy.

As price hikes slow down, the government will feel emboldened to continue its charge against the Central Bank, which has kept benchmark interest rates at 13.75 percent since August. On Tuesday, the bank’s chairman, Roberto Campos Neto, ruled out an immediate rate cut, saying policymakers still have to prove that inflation is converging towards the 1.75-4.75-percent target band.

Economists believe the target will be raised in the middle of the year, but some add that the noise created by the government may hurt its credibility with the markets, which would impact long-term interests on Brazilian bonds.

The government is not alone in urging for lower interest rates. Industry owners cite high rates as their top problem for doing business in an April survey which showed that confidence levels within the sector have fallen to a two-year low.

Last week, Senate President Rodrigo Pacheco threw a veiled threat at Mr. Campos Neto, hinting that Congress could be inclined to revise the monetary authority’s autonomy unless there is a pivot on monetary policy.

The post Mid-April inflation below forecasts, but widespread appeared first on The Brazilian Report.