Central Bank chairman: Brazil to have ‘two to three months of deflation’

Brazil’s official statistics agency will on Wednesday publish the IPCA-15 mid-month inflation index for August — and markets overwhelmingly expect the 12-month rate to dip below the 10-percent mark for the first time in almost a year. 

Roberto Campos Neto, chairman of the Brazilian Central Bank, said during an event in Chile that he actually expects consumer prices to go down for the next “two to three months.” Mr. Campos Neto forecasts year-end inflation to be at 6.5 percent or lower.

In July, consumer prices were down 0.68 percent, the first monthly drop in over two years and the biggest monthly deflation on record. As our Explaining Brazil podcast showed, that slide was concentrated on fuel and electricity prices, thanks to government measures to cap energy taxes. But the cost of food and clothing continued to soar.

Mr. Campos Neto said short-term deflation should follow a similar pattern.

“We have a very high inflationary process, there is still hard work to be done,” he pointed out while highlighting that services inflation is still rising, despite “some improvement” in the diffusion index.

Service prices grew by 0.8 percent last month, bringing the sector’s 12-month inflation to almost 9 percent. Markets agree with the Central Bank chairman’s estimates. Per the latest Focus Report, the benchmark consumer price index should end this year at 6.82 percent.

• #centralBank
• #inflation