Brazil Inflation Surprise Firms Up Bets on Faster Rate Cuts

Brazil Inflation Surprise Firms Up Bets on Faster Rate Cuts

Chamber Articles Category: Economic News Post Date: 03/10/17 Source: Bloomberg By: David Biller
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Brazil’s inflation surprised analysts by slowing in February, prompting traders to increase wagers the central bank has room to accelerate monetary easing next month.

The benchmark IPCA index climbed 0.33 percent in February, below the median 0.43 percent forecast from 47 analysts surveyed by Bloomberg, whose lowest estimate was 0.36 percent. It was also the lowest reading for the month since 2000, the national statistics institute reported Friday. In the 12 months through February, consumer prices rose 4.76 percent, the slowest since September 2010.

Annual inflation in Latin America’s largest economy has been slowing rapidly toward the 4.5 percent target as demand plummets. Gross domestic product data released this week showed Brazil’s recession deepening in the fourth quarter, driven by drops in both investment and family spending. The market is betting the combination of recession and lower price increases will pave the way for the central bank, led by Ilan Goldfajn, to take bolder action.

“This is going to generate pressure on the central bank to cut the Selic in a stronger way,” Andre Perfeito, chief economist at Gradual Investimentos, said regarding the benchmark interest rate. “It seems like it will motivate two 100-basis-point cuts. It’s good news.” Read Full Article