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ECONOMY | 12-09-2023 14:54

Brazil inflation accelerated in August after Central Bank interest rate cut

Brazil’s inflation rate rises for second straight month in the wake of trimming of rates by central bank, but food prices decrease.

Annual inflation in Brazil rose for the second straight month in August, to 4.61 percent, officials said Tuesday, after the central bank cut interest rates for the first time in three years.

Latin America's biggest economy had registered annual inflation of 3.99 percent in July, the first time the rate had risen in more than a year.

Energy prices drove the increases in August, with rises in the housing (1.11 percent) and transportation (0.34 percent) categories, driven by higher electricity and fuel costs, said the IBGE national statistics institute.

Food prices, however, decreased for a third straight month, by 0.85 percent, it said.

The monthly inflation reading was 0.23 percent.

After responding to sharp price increases unleashed by the Covid-19 pandemic and the war in Ukraine with aggressive interest-rate hikes, Brazil's central bank started easing the benchmark Selic rate in August with a bigger-than-expected half-point cut.

Despite recent price increases, inflation remains within the central bank's current target range of 1.75 to 4.75 percent.

"We doubt [the August inflation reading] will stop the central bank from cutting the Selic rate by another 50 basis points" this month, the Capital Economics consulting firm  said in a note.

Leftist President Luiz Inácio Lula da Silva has been urging the central bank to lower interest rates to boost economic growth since he returned to office in January.

Brazil's economy grew a better-than-expected 0.9 percent in the second quarter.

Analysts polled by the central bank currently forecast economic growth of 2.64 percent for the year.




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