Brazil's Mid-August Inflation Slows for Second Month


Brazil's inflation through mid- August decelerated to the slowest pace in five months, bolstering confidence that the central bank will bring consumer prices back to target next year.

The inflation rate as measured by the benchmark IPCA-15 index decreased to 0.35 percent from 0.63 percent through mid- July as food prices eased, the national statistics agency said in a release today on its Web site. It was less than 0.38 percent median estimate in a Bloomberg survey of 35 economists.

The central bank has raised interest rates three times since April, to 13 percent from a record low 11.25 percent, in a bid to cool domestic demand and inflation running near the 6.5 percent upper limit of the government's target range. Policy makers are expected to raise the benchmark rate to 14.75 percent by the end of the year, according to an Aug. 15 central bank survey of 100 economists.

Brazil's economy is showing signs of slowing in the face of a tightening monetary cycle and worsening outlook for its commodity exports.

Unemployment in July rose for the first time in five months, the national statistics agency said yesterday. Retail sales in June grew a less-than-expected 8.2 percent compared to the same period a year ago, slowing from a 11.1 percent in May.

Today's report showed that the annual inflation rate for the 12 months through mid-August slowed for the first time in five months to 6.23 percent from 6.30 percent in mid-July. Month-on-Month food prices rose 0.25 percent, their lowest reading since November and down from 1.75 percent in mid-July.


TradingEconomics.com, Bloomberg
8/24/2008 9:47:11 AM