Brazil Inflation Surprises With Bigger-Than-Expected Slowdown
(Bloomberg) -- Brazil’s annual inflation slowed much more than expected in early September even after a hike to utility bills, giving some good news to the central bank as policymakers raise borrowing costs.
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Official data released Wednesday showed prices rose 4.12% from a year earlier, below all forecasts in a Bloomberg survey of economists that had a 4.29% median estimate. On the month, they increased 0.13%.
Brazil’s central bank began lifting interest rates last week to cool down a hot economy and bring inflation levels down to its 3% target. So far, the effects of double-digit borrowing costs have been blunted by factors including a strong jobs market, a weak currency and the worst drought on record.
Brazil’s power regulator began applying additional charges to electricity bills in early September in response to a drop in reservoir levels at hydroelectric plants. Over half of the South American nation’s power supply comes from hydro, and higher energy costs are reverberating across the economy.
Gabriel Galipolo, the central bank’s director of monetary policy and an ally of President Luiz Inacio Lula da Silva, is set replace current Governor Roberto Campos Neto, whose term ends in December.
Despite an anti-inflation stance from Galipolo, investors are fretting he may cave to political pressure from Lula, who has long clamored for lower interest rates to jolt growth.
--With assistance from Giovanna Serafim.
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