Brazil’s inflation rises in July, reaching 4.50% year-over-year.
July's inflation slightly exceeded market expectations, which had predicted a 0.35% increase according to the average projections.
The rise in transportation costs (+1.82%) was a key factor in the July increase of the Broad National Consumer Price Index (IPCA), Brazil’s main inflation gauge.
Inflation in Brazil rose by 0.38% in July, bringing the year-over-year rate to 4.50%, according to official data released on Friday.
Prices had increased by 0.21% in June, with the annual rate at 3.93%, as reported by the official statistics institute, IBGE.
The rise in transportation costs (+1.82%) played a significant role in July’s inflation spike, particularly due to sharp increases in gasoline prices (+3.15%) and airline fares (+19.39%).
Additionally, the hike in residential electricity tariffs (+1.93%) and housing costs (+0.77%) also contributed to the inflationary pressure.
Meanwhile, prices in the food and beverage category decreased by 1 percent.
July’s inflation slightly exceeded market expectations, which had predicted a 0.35% increase according to the average projections of 41 financial institutions and consultancies surveyed by the economic newspaper Valor.
The 12-month inflation rate in July reached the upper limit of the Central Bank of Brazil’s target range, which is set at 3% with a tolerance margin of +/- 1.5 percentage points.
The market expects inflation to be at 4.10% by the end of the year, according to the latest Focus Bulletin from the Central Bank, published last week.
The rise in inflation was one of the reasons cited by the Central Bank’s Monetary Policy Committee last week for keeping its benchmark interest rate unchanged at 10.5% for the second consecutive time, following a pause in the cycle of seven consecutive cuts since August 2023.
This decision was disappointing for President Luiz Inácio Lula da Silva, who, since taking office in 2023, has been advocating for faster rate cuts to stimulate economic growth.
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