Brazil: Inflation eases further in February
March 11, 2020
Consumer prices increased 0.25% over the previous month in February, up from January’s 0.21% increase. The reading outstripped market expectations of a 0.15% rise and was largely due to higher education costs due to annual tuition fees. Lower food and beverage; transportation; and housing prices partially offset the overall rise, however.
Inflation softened to 4.0% in February from 4.2% in January, hitting the Central Bank’s target of 4.0% with a tolerance band of plus or minus 1.5 percentage points for the end of 2020. Annual average inflation, on the other hand, was stable at 3.8%.
Looking ahead, inflation is likely to ease further, particularly if the coronavirus outbreak deters economic activity, and despite the marked depreciation in the Brazilian real thus far this year. Meanwhile, weaker inflation and a shifting outlook for the economy raises the odds that the Central Bank will cut rates again at its 17–18 March monetary policy meeting.
Author: Lindsey Ice, Economist