The IPCA-15 index, a mid-month inflation gauge released by the Brazilian Institute of Geography and Statistics, suggests that consumer prices have risen by 0.44 percent in the first half of May.
The index came in below market expectations — the median forecast measured by Bloomberg stood at 0.47 percent.
Still, it shows an acceleration after two months of slowing down. Moreover, prices rose for eight of the nine product groups surveyed. This was particularly the case for pharmaceuticals (+2.06 percent) and transportation (+0.77 percent). The IPCA-15 index is considered to be Brazil’s most reliable inflation bellwether.
Markets are downgrading their inflation forecast for this year, as we explained in today’s edition of the Brazil Daily newsletter. Investors’ mood soured further after Finance Minister Fernando Haddad said before the House Finance and Taxation Committee that Brazil’s current 3 percent inflation target as “unimaginable” and “extremely demanding.”
He suggested that without fundamental reforms to the tenets of fiscal policy, the target would be all but unattainable.
The National Monetary Council will convene on Thursday — and markets debate on whether or not Mr. Haddad’s words are a beacon of a possible change to the country’s inflation target.
The council comprises the finance and planning ministers and the Central Bank chairman, which means the federal government holds two of the three votes necessary to change the target.
Citing unnamed government sources, Reuters reports that the government does not plan any change — at least not this time around.
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