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Brazil Inflation August 2021

Brazil: Inflation comes in at highest level since February 2016 in August

Consumer prices rose a seasonally-adjusted 0.87% over the previous month in August, coming in below the 0.96% rise seen in July. Looking at the details of the release, the milder rise was primarily due to softer growth in prices for transportation. Nevertheless, August’s reading was the 15th consecutive month of rising consumer prices.

Inflation came in at 9.7% in August, up from July’s 9.0%. August’s reading marked the highest inflation rate since February 2016. Meanwhile, the trend pointed up, with annual average inflation coming in at 6.1% in August (July: 5.5%).

Regarding the outlook for inflation and the impact on monetary policy, Solange Srour and Lucas Vilela, economists at Credit Suisse, commented:

“All in all, today’s result shows that inflation pressures in the country remain high and are not likely to subside in the coming months. The disinflation process in the country will be challenging, as inertia is high and inflation expectations for 2022 keep increasing. We are increasing our IPCA inflation forecast from 7.7% to 8.1% in 2021 and maintaining it at 5.0% in 2022, with risks concentrated on the upside. For monetary policy, we maintain our call that the Central Bank will increase the SELIC interest rate by 100 basis points three consecutive times, reaching 8.25% in year-end 2021, but the risks are tilted to a faster pace.”

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