SAO PAULO, July 28 - Brazil's halfway-month consumer price index, the IPCA-15 compiled by statistics agency IBGE, recorded a surprisingly small increase of 0.06% in the month to mid-July, official figures showed on Tuesday. The monthly reading marked a marked slowdown from June's 0.41% rise and undershot the median economist projection in a Reuters poll, which had forecast a 0.20% advance.
On an annual basis, inflation measured by the IPCA-15 fell to 4.52% from 4.80% a month earlier. That outcome was also below market expectations, which had centred on a 4.67% reading. The result moves the 12-month rate closer to Brazil's central bank target of 3.0%, plus or minus 1.5 percentage points.
IBGE said the month-to-mid-July increase was driven primarily by rising housing costs, with a notable contribution from a jump in electricity bills. At the same time, the sector of food and beverages exerted downward pressure on prices, with that group declining 0.66% in the period.
The printed figures arrive with the central bank's interest rate-setting committee scheduled to meet on August 4-5. Policymakers cut the policy rate by 25 basis points at their previous meeting - the third consecutive reduction - lowering the Selic rate to 14.25%. Following that move, the committee signalled that further steps remain open while acknowledging a more challenging inflation outlook.
Central bank governor Gabriel Galipolo said last week that worries about unanchored inflation expectations argue for keeping monetary policy restrictive for longer, noting that the labour market and economic activity in Latin America's largest economy remain resilient.
The mid-July IPCA-15 release will be monitored by investors and policymakers as they assess the balance between easing price pressures and persistent upside risks. With the monthly figure coming in well under forecasts and the 12-month rate edging closer to the central bank's tolerated band, the data provide a fresh input for deliberations at the early August meeting.
Data snapshot
- IPCA-15 month to mid-July: +0.06%
- IPCA-15 month to mid-June: +0.41%
- Median economist forecast (poll): +0.20%
- 12-month IPCA-15: 4.52% (previously 4.80%)
- Market expected 12-month reading: 4.67%
- Central bank inflation target: 3.0% +/- 1.5 percentage points
- Policy rate after last meeting: 14.25% (25 bps cut; third straight reduction)
- Policy committee next meeting: August 4-5
The immediate implications for markets and the real economy will depend on how the central bank interprets persistent elements such as electricity-driven housing costs and the recent weakness in food prices. For now, the data indicate a moderation in headline inflation, but officials have flagged that inflation expectations and underlying dynamics will play a central role in setting the future path for rates.