Central Bank: Inflation likely to be negative in June, then rebound
Brazil’s inflation, as gauged by consumer price index IPCA, may become negative in June and rise again in the second half of the year, Brazilian Central Bank President Roberto Campos Neto said Monday (Jun. 12). In an event promoted by the Retail Development Institute (IDV), he argued that the index should end the year with an improvement from earlier forecasts.
“In some months, [the IPCA] should reach 0.4 to 0.5 percent, which is likely to bring inflation for the year somewhere between 4.5 and 5 percent, closer to 4.5 percent. This is an improvement from what we ad expected, but a slow improvement,” Neto declared.
In the latest edition of the Inflation Report, released in March, the monetary authority forecast that the IPCA would end the year at 5.8 percent. This Monday’s edition of the Focus Readout, a weekly survey of financial institutions conducted by the Central Bank, points to an expectation of 5.42 percent for the IPCA this year.
The fall in commodity prices, Neto remarked, has contributed to curb the inflation. He went on to warn, however, that core inflation has declining more slowly, and remains higher than the final indexes.
“We still have a 6.7 percent average for core inflation. For the first time in history, inflation in Brazil is much lower than in advanced countries. This means the job we did was effective, and that there are some volatile items that had a positive contribution,” he stated.
Interest
During the event, Campos Neto received several requests from IDV head Luiza Trajano to start reducing the Selic, Brazil’s benchmark interest rate. According to Neto, the behavior of the financial market, where future rates have fallen sharply in the last few days, favors a loosening of monetary policy—but not right now.
“The future interest curve had a drop of nearly three percent, depending on the term you look at. This means that the market is giving credibility to what’s being done, which makes room for monetary policy action ahead,” he answered.
