Brazil: Inflation drops to four-month low in December
Inflation came in at 4.6% in December, which was down from November’s 4.7%. December’s reading represented the lowest inflation rate since August. Looking at the details of the release, December’s moderation chiefly reflected softer clothing and textiles price growth. Conversely, housing prices rose at a quicker pace in December compared to the previous month, and price pressures for food and beverages also picked up pace.
Accordingly, the trend pointed down mildly, with annual average inflation coming in at 4.6% in December (November: 4.7%).
Finally, consumer prices increased a seasonally adjusted 0.56% in December over the previous month, accelerating from the 0.28% increase recorded in November. December’s result was the highest reading since April.
Despite headline inflation’s downtick in December, it still surprised markets to the upside. Meanwhile, core inflation slowed to 5.4% in the month (November: 5.6%), the lowest level since June 2021.
December’s result meant inflation in 2023 came in at 4.6%; it fell within the Central Bank of Brazil’s tolerance band of plus or minus 1.5 percentage points around its 3.25% target for the year by a whisker. This bodes well for the continuation of the Central Bank’s loosening cycle. Going forward, inflation will continue to slow down, albeit at a softer pace: A higher base of comparison and ongoing interest rate cuts will limit price pressures’ moderation.