Brazil's inflation eases, bolstering case for rate cut

Reuters

Published Sep 22, 2016 09:11AM ET

Brazil's inflation eases, bolstering case for rate cut

By Silvio Cascione

BRASILIA (Reuters) - Brazil's inflation rate eased more than expected in mid-September as food prices fell, underscoring bets on an imminent interest rate cut by the central bank.

Consumer prices as measured by the IPCA-15 index rose 0.23 percent in the month to mid-September, down from 0.45 in the previous month, government statistics agency IBGE said on Thursday. The index had been expected to rise 0.35 percent, according to a Reuters poll.

In the 12 months through mid-September, consumer prices rose 8.78 percent, down from 8.95 percent a month before, IBGE said.

Although the 12-month inflation rate remained far above the official 4.5 percent target, the fast decline added to signs that companies are increasingly refraining from raising prices in the midst of a severe recession.

Yields on interest rate futures <0#2DIJ:> were down, signaling a 90-percent likelihood of a rate cut on October 19 by the central bank. The bank has held its benchmark rate steady at 14.25 percent, its highest in a decade, but signaled it could start easing soon if inflation expectations fell.

Food prices edged 0.01 percent down in the month to mid-September after a 0.78 percent increase in mid-August. Food prices had been rising at a surprisingly fast rate in previous months, partly due to bad crop weather.

Transportation and communication prices also dropped, while the cost of personal expenses and healthcare rose.