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Brazil's inflation likely eases to 4.7 percent in mid-March
March 20, 2017 / 5:34 PM / 8 months ago

Brazil's inflation likely eases to 4.7 percent in mid-March

BRASILIA (Reuters) - Brazil’s inflation rate probably approached the center of the official target in mid-March as food prices continued to ease and a long recession curbed the increase of services prices, according to a Reuters poll of economists on Monday.

FILE PHOTO: A man walks past mannequins lined up at the entrance of a shop, in downtown Sao Paulo, Brazil March 15, 2017. REUTERS/Nacho Doce/File Photo

Consumer prices probably rose by 4.73 percent in the 12 months through mid-March, slowing from an increase of 5.02 percent in mid-February, according to the median of 25 forecasts that ranged from 4.68 to 4.82 percent. BRIPCY=ECI

The government targets inflation at 4.5 percent.

Prices are expected to have risen just 0.15 percent in mid-March from mid-February, down from a rise of 0.54 percent in the previous month, according to the median of 26 estimates that varied between 0.11 percent and 0.20 percent.

The mid-March inflation numbers will be released on Wednesday at 9 a.m. local time (1200 GMT).

Falling inflation is expected by economists and investors to prompt the central bank to accelerate the pace of rate cuts at its next meeting in April and drive rates down to 8.50 percent by the end of 2018 from the current 12.25 percent.

“One of the best harvests in a decade should keep food prices down, while a stronger currency should help fuel prices, following the new fuel adjustment policy,” economists with Morgan Stanley wrote in a research note.

The economists led by Arthur Carvalho estimated that inflation in services prices, considered to be more sensitive to monetary policy and economic activity than industrial goods, probably slowed to the lowest rate since 2008.

Brazil’s sudden inflation slowdown highlights the unprecedented severity of the country’s two-year recession and is helping President Michel Temer’s economic team to restore the credibility of fiscal and monetary policy to curb price rises.

Price increases have undershot market expectations for seven straight months, according to Reuters polls. As a result, most economists expect the government to reduce its inflation target later this year for the first time in more than a decade.

Editing by Jeffrey Benkoe

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