Brazil Is on Path to Recovery with Low 4.5% Inflation

Brazilian open air market Brazil is going through a "non-inflationary economic recovery," says the Brazilian Central Bank. Brazil inflation slowed for the third month in a row in July with annual inflation slowing to 4.5%, the lowest since December 2007.

Consumer prices as measured by the IPCA index rose 0.24% in July from 0.36% in June, according to a release from the national statistics agency.

Three of nine categories saw prices fall in July, led by a 0.1% drop in the cost of communications equipment. Food costs that fell 0.06%, compared with a 0.7% rise in June, also helped contain prices.

Annual inflation slowed to 4.5%, from 4.8% in June.

Brazil's central bank last month cut its overnight interest rate for a fifth straight time, by a half-point, to a record low 8.75% from 9.25% and signaled it was prepared to keep borrowing costs unchanged.

Policy makers last month said that the current level of the benchmark rate was "consistent" with a "non-inflationary economic recovery," according to the minutes of the Central bank's July 21-22 meeting posted on the Central bank's website.

Brazil fell into recession in the first quarter for the first time since 2003, as GDP had its second straight quarterly contraction, shrinking 0.8%. According to a Central bank survey of 100 analysts published this week Brazil's economy will shrink 0.38% this year before rebounding 3.6% in 2010.

Inflation is expected to end 2009 at 4.5%, the midpoint of the government's target range, according to the Central bank survey. The same survey shows the bank leaving the so-called Selic rate unchanged this year.

Mercopress

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