Brazil monthly inflation eases in August as food pressure wanes

Rio de Janeiro - Brazil’s monthly consumer inflation eased in August on slower food price increases as the central bank says it’s monitoring market data to determine when to start a monetary easing cycle.

The benchmark IPCA consumer price index rose 0.44% after a 0.52% gain the previous month. That matches the median forecast from 46 economists surveyed by Bloomberg.

Food and beverage prices increased 0.3% in August, following a 1.32% surge the previous month. Prices of transportation rose 0.27% after a 0.4% increase in July.

Annual inflation accelerated to 8.97%, from 8.74% in July. While the rate has dropped from the double digits seen at the beginning of this year, it remains almost double the official target of 4.5%.

That is making it difficult for policy makers to help stimulate the economy with a reduction in the benchmark interest rate, which remains at a 10-year high.

The central bank board has signalled it won’t cut borrowing costs to stimulate economic growth until it has greater confidence it will reach the inflation target.

The institution’s president, Ilan Goldfajn, said in an interview on Thursday that investor perception of risk in the Latin American country will be a key factor in his decision to ease up on monetary policy.

Analysts surveyed by the central bank are optimistic that consumer inflation will cool enough this year and next to allow for reductions in borrowing costs.

Policy makers will cut the key rate by more than 3 percentage points by the end of 2017, when the economy will rebound from a two-year recession, according to the survey.

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