Food prices continue to drive inflation up. Photo: Evandro Leal/Agência Enquadrar/Folhapress
Annual Brazilian inflation continued to ease off in January, although at a slower pace than in previous months. The IPCA consumer price index was up 0.53 percent in January, slightly below market expectations, taking 12-month inflation to 5.77 percent.
The new inflation reading comes amid a very public tiff between President Luiz Inácio Lula da Silva and the Central Bank, with the head of state bashing the monetary authority for keeping interest rates at double-digit levels. With the Selic benchmark rate at 13.75 percent since August of last year, Brazil has the world’s highest real interest rates (after discounting for inflation).
With price hikes coming lower than markets expected, Lula could have more ammunition to bash central banker Roberto Campos Neto’s monetary policy guidance. The president has talked about the Central Bank chairman in unflattering ways, and the two have yet to meet this year.
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