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Low Inflation Seems to Have Days Counted in Brazil

Brazilian supermarket Brazil's consumer prices index in August increased at its slowest pace in 11 months, 0.28% following on a significant drop in food prices according to the latest release from the IBGE (Brazilian Institute of Geography and Statistics).

Retail inflation in July was 0.53% and in August 2007, 0.47%. Annual inflation slowed to 6.17% from a three-year high of 6.37%.

According to IBGE the Food and beverage item was crucial for the slowing of inflation from July to August, having dropped 0.18% in August after increasing 1.05% in July.

In the first eight months of the year the index has reached 4,48% well above the 2,8% of the same period the previous year. The Central Bank target for 2008 is 4.5% with plus/minus two percentage point tolerance.

The Brazilian Central bank has toughened its monetary policy to help contain inflationary pressures, and the current basic rate stands at 13%.

According to market analysts the Central Bank is expected to further increase the basic Selic rate when the monetary council meets next September 10, most probably 0.75 percentage points to 13.75%.

Goldman Sachs is forecasting in increase in inflation in the last quarter of 2008. According to the international investment management firm, "the consumer inflation decline should have short life".

The Goldman Sachs people note that since July food prices have been responsible for moderating inflation, but they believe that starting in August, the IPCA will start advancing again and will reach about 7% by the end of the year. As they see it, among the factors driving prices up there will be a strong growth in domestic demand.

Mercopress/Bzz

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  • Show Comments (6)

  • João da Silva

    Ch.c
    [quote]The ones that will contain the wages pressure should do fine in inflation.
    On top of that there is/will be pressure to LOWER interests rates. Those who will succumb the most will have their currencies…PLUMMET !

    And guess what tend to do populists governments ! [/quote]

    Actually, we are on the same frequency except that you are more articulate 🙁

    btw, do you have a web site where we can contact directly?

  • CH.C..

    Somewhat true and wrong Joao !
    “The same thing is happening now regarding the food items, in spite of their prices started going up gradually since the beginning of last year and took a sharp upward turn from the second trimester of this year”

    You are still right…on a year over year basis, but OIL is down sharply from its peak, so are corn down 35 % from its peak,
    wheat down 50 %, soyabeans 25 % and most metals down 25 to 40 %.

    On Brazilian energy at the pump. dont forget that Petrobras got an increase for the first time since….2005. Meaning part of your past inflation was manipulated by your cheaters !

    This said, the above goods mentionned are only part of the overall inflation.
    NOW over the next 12 months or so, what has to be seen yet is the pressure for HIGHER WAGES !!!!!
    And this is also as true for all countries, including the USA & EUROPE !
    The ones that will contain the wages pressure should do fine in inflation.
    On top of that there is/will be pressure to LOWER interests rates. Those who will succumb the most will have their currencies…PLUMMET !

    And guess what tend to do populists governments !
    😀 😉

  • João da Silva

    Ch.c
    [quote]Sorry Joao ![/quote]

    No problem Ch.c, I was sarcastic as I live in Brazil and know how the prices come down during an electoral season.For example, during the previous two months before the 2006 general elections, the price of the gasoline came DOWN drastically (20-25% reduction). 2 days after the elections it went UP again to its normal price! The same thing is happening now regarding the food items, in spite of their prices started going up gradually since the beginning of last year and took a sharp upward turn from the second trimester of this year. The newspapers and the government started talking about the higher inflation caused by the food prices. The government, as you know, increased the value of the “Bolsa Familia” at that time.

    As you have said many times our small farmers are screwed and the big ones get subsidized loans to keep the prices down “temporarily”

    [quote]Or are you saying Brazil Municipal elections influences the inflation rate in USA, EU, China, India, Russia, Argentina, South Africa, Australia, etc etc PLUS the world prices in commodities stated above.
    [/quote]

    I never would say it, Ch.c. You know that. I am talking about Brazilian inflation rate and the bullshit explanations we are being fed with by the “Rulers”. 😀

  • ch.c.

    Joao……
    this said I agree with you, but for other reasons !
    Just remember what I said too, weeks ago !
    since then I was right to the nose…..on the Brl currency : DOWN and the Us$ : UP 10 % or so

  • ch.c.

    Sorry Joao !
    But the Brazilian politics has nothing to do with the world prices of….
    – grains
    – metals
    – oil & gas
    – wages

    If you will get it right it will simply be….PURE COINCIDENCE !!!!!!!

    Or are you saying Brazil Municipal elections influences the inflation rate in USA, EU, China, India, Russia, Argentina, South Africa, Australia, etc etc PLUS the world prices in commodities stated above.

    Hmmmmm !

    😀 😉

  • João da Silva

    Low Inflation Seems to Have Days Counted in Brazil
    [quote]Goldman Sachs is forecasting in increase in inflation in the last quarter of 2008. According to the international investment management firm, “the consumer inflation decline should have short life”.[/quote]

    I am glad that Goldman Sachs finally agreed with me. 😉

    Hang on till the results of our Municipal elections come out. And then ya all will agree with the statement I keep on making: “It is all Politics, JUNKIES” 🙂 😉 😀

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