Brazil’s Inflation slows down on Falling Food and Beverage Prices

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Brazil’s Inflation slows down on Falling Food and Beverage PricesBrazilian consumer prices slowed down in the month through mid-August on declining prices of food and beverages. The IPCA-15 index of inflation rose 0.14 percent, down from 0.17 the previous month, reported the national statistics agency.

Food and beverage costs plunged 0.32 percent over the period, a much faster pace compared to a drop of 0.03 percent in mid-July. Personal costs dropped 0.67 percent in mid-August after increasing 1.74 percent a month earlier.

Annual inflation dropped to 6.49 percent compared with 6.51 percent the previous month. Analysts surveyed by Bloomberg News had expected the rate to retreat slightly to 6.48 percent, in what was the first drop in the annual rate since January. The central bank targets an annual inflation rate of 4.5 percent, plus or minus 2 percentage points.

Swap rates on the contract that matures in January 2015, which was traded heavily today compared to the rest, plunged 0.01 percentage point or one basis point, to 10.8 percent as of 9:08 a.m. in Sao Paulo. The real slid 0.3 percent to 2.2541 per U.S. dollar.

Meanwhile, the government plans to bolster lending by up to 150 billion reais ($66 billion) in order to boost economic growth without fuelling inflation ahead of October presidential elections. The central bank officials lowered the capital requirements for lenders by 15 billion reais, a decision that is expected to free up to 140 billion reais in loans, and also channel 10 billion reais retained to satisfy reserve requirements towards lending to businesses and consumers. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com