Increases in airfare and electricity prices in Brazil were not sufficient to produce a big rise in inflation in July 2019. The Broad National Consumer Price Index 15 (IPCA-15) rose 0.09% in July after registering an even lower growth of 0.06% in June. The main factor for this very small growth was the fall in fuel prices.
With a stable IPCA, several Brazilian economists are betting on a 0.25% reduction in the basic interest rates of the economy (Selic). IPCA closes June up just 0.01%, reflecting weak demand and the contraction in food and fuel prices. Without cost-of-living pressure, analysts are predicting a drop of at least 0.25 percentage points in the Selic rate at the next Copom meeting in the last two days of July. Currently, the Selic rate is at 6.5% per year.
With Selic at this level in Brazil, fixed-income investments such as savings, floating-rate CDBs, DI funds, and Selic Treasury bonds pay less, as their yields are pegged to the Selic rate.
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