Inflation rises less and ends 2016 close to the target.
Brazil's preliminary official inflation figures rose less than expected in December and closed the year very close to the government's target, which opens even more room for the Central Bank to accelerate the pace of interest rate cuts; the Broad National Consumer Price Index-15 (IPCA-15) closed 2016 with an accumulated increase of 6,58 percent, the lowest level since 2014 (6,46 percent) and after closing 2015 with an increase of 10,71 percent, the Brazilian Institute of Geography and Statistics (IBGE) reported on Tuesday.
Reuters - Brazil's preliminary official inflation figures rose less than expected in December and ended the year very close to the government's target, which opens up even more room for the Central Bank to accelerate the pace of interest rate cuts.
Brazil's National Consumer Price Index-15 (IPCA-15) closed 2016 with a cumulative increase of 6,58 percent, the lowest level since 2014 (6,46 percent), after closing 2015 with an increase of 10,71 percent, the Brazilian Institute of Geography and Statistics (IBGE) reported on Tuesday.
In the 12 months through November, the index had accumulated a rise of 7,64 percent, and the expectation in a Reuters poll was that it would end the year at 6,71 percent.
In December, the IPCA-15 slowed its rise to 0,19 percent, compared to 0,26 percent in the previous month and well below the estimated increase of 0,30 percent. This is the lowest level for December since 1998 (0,13 percent).
The government's inflation target for this year is 4,5 percent according to the IPCA, with a margin of 2 percentage points. The IPCA-15 result increases the likelihood of meeting the target and thus helps the Central Bank to increase the pace of cuts to the benchmark interest rate, currently at 13,75 percent per year.
In general, economic agents believe that the Central Bank will cut the Selic rate by 0,5 percentage points in January, above the 0,25 percentage point cuts made in the two previous meetings of the Monetary Policy Committee (Copom).
"The result is favorable for the Central Bank to accelerate the pace, but I still think that in January the cut (of the Selic rate) will be 0,50 percentage points because in the communication (from the Central Bank) there is no indication of such a significant increase in pace," said Alessandra Ribeiro, an economist at the consulting firm Tendências.
"But that signal could be given later, and a 0,75 percent reduction could come at the second meeting," he added, referring to the Copom meeting in February.