SAO PAULO (Reuters) – Brazil’s annual inflation accelerated in mid-September to 5.00%, data from statistics agency IBGE showed on Tuesday, coming in line with market expectations as the central bank signals it will maintain its current pace of monetary easing.
In Latin America’s largest economy, the IPCA-15 consumer price index gained steam when compared to the 4.61% reading seen at the end of the previous month, but roughly matched the 5.01% forecast by economists polled by Reuters.
That is likely to further back the central bank’s stance of cutting its benchmark interest rate at a pace of 50 basis points per meeting, despite government officials having suggested the bank could pick up the pace this year.
The central bank delivered its second 50-basis-point cut in a row to 12.75% earlier this month and flagged further cuts of the same magnitude ahead as some of its board members remain cautious given economic activity and labor market resilience.
Larger rate cuts would require substantial positive surprises in inflation, the central bank has said, and that is not what the mid-September figures showed.
“These inflation data will have given ammunition to Copom’s hawks and support our view that the easing cycle will continue in 50bp steps until the middle of next year,” Capital Economics’ chief emerging markets economist, William Jackson, said.
He expects the board to then shift to smaller 25-basis-point steps, taking the key Selic rate to 9.5% by the end of 2024.
In the month to mid-September, according to IBGE, consumer prices in Brazil rose 0.35%, up from 0.28% in the previous month and slightly below the 0.38% increase projected in a Reuters poll.
That was mainly driven by higher transportation costs as gasoline prices rose, the statistics agency said, while housing and personal expense costs also jumped. Lower food and beverage prices partially offset those increases, IBGE added.
(Reporting by Gabriel Araujo; Editing by Steven Grattan)
