Brazil’s inflation remained significantly above the central bank’s target in mid-July, according to official data released Friday, as policymakers prepare for a rate-setting meeting next week where they are widely expected to keep interest rates unchanged at their highest level in nearly two decades.
Consumer prices in Latin America’s largest economy rose 5.30% in the 12 months to mid-July, according to Brazil’s statistics agency IBGE. This marked a slight increase from 5.27% in the previous reading and exceeded economists’ expectations of 5.26%, based on a Reuters poll.
The central bank’s inflation goal is 3%, with a tolerance range of ±1.5 percentage points. Officials have reiterated their commitment to bringing inflation back within this range.
In response to rising prices, the central bank has raised interest rates by a total of 450 basis points between September and June, bringing the benchmark Selic rate to 15% — its highest level since July 2006. Last month, the bank indicated it would maintain this rate for an extended period to observe the impact of previous hikes.
“The latest inflation reading doesn’t provide any incentive for further rate hikes,” said Kimberley Sperrfechter, emerging markets economist at Capital Economics, who expects room for rate cuts to open up toward the end of the year.
The bank’s monetary policy committee, known as Copom, will convene on July 29 and 30.
For the single month leading up to mid-July, the IPCA-15 consumer price index rose by 0.33%, up from 0.26% in the prior month and slightly above the Reuters poll median forecast of 0.30%.
The monthly uptick was mainly driven by increased housing expenses, particularly electricity prices, and rising transportation costs, notably a spike in airfares, according to IBGE. However, food and beverage prices—typically closely monitored—declined for the second consecutive month.
“Today’s inflation figures won’t alter Copom’s stance,” said Andre Valerio, senior economist at Inter. “They’re likely to keep rates on hold, restate their commitment to the inflation target, and avoid signaling any timing for the start of a rate-cutting cycle.”
