Cost of living in Brazil: the eighth consecutive increase in electricity helps to raise annual inflation preview; inflation in Brazil in the last 12 months was 3.22%

According to the Broad Consumer Price Index 15 (IPCA-15), a survey made by IBGE, the inflation pressured by the eighth consecutive increase in electricity, in September was 0.09%, close to that registered in August (0.08%). With the result, the inflation forecast accumulated high of 2.60% in the year and 3.22% in 12 months. The housing group accounted for the largest price change of 0.76%.

According to the website G1, Transport group prices also rose 0.09%, in August the same group came from a 0.78% drop in August. The result was influenced by the 0.35% increase in fuels. Ethanol and diesel prices rose by 2.15% and 0.58%, respectively, while gasoline fell by 0.06% in Brazil.

IPCA-15 numbers reinforce the favorable inflation scenario assessed by the Brazilian Central Bank in the Copom minutes. The 3.22% increase over the past 12 months is well below the center of the target.

This raises expectations that the Brazilian Central Bank will continue to reduce the basic interest rates of the economy, the Selic. High unemployment and controlled inflation require a policy of cutting interest rates for many economists.

Cost of living in Brazil: fall in fuel prices causes the Extended National Consumer Price Index 15 (IPCA-15) to rise only 0.09% in July

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.