Economy

Brazil Central Bank’s Quarterly Inflation Report to Offer Clues

Brazil’s central bank will release Thursday its quarterly inflation report.

The Wall Street Journal
26/06/2014 13:47
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Brazil’s central bank will release Thursday its quarterly inflation report, a data-packed analysis of global and domestic trends that offer a window on how the monetary authority sees the economy.

 

This edition gets special attention because it will be the first after the bank stopped raising its basic Selic rate last month.

 

The Selic has gradually moved to 11% from 7.25% since April 2013, with the goal of taming inflation, which stubbornly remains at 6.4%. Under Brazil’s inflation-targeting policy, the annual IPCA consumer-price index gain must be around 4.5%, with a tolerance range of two percentage points up or down.

 

The IPCA inflation rate was last seen at 4.5% in 2009. Government officials seem happy with the IPCA within its tolerance range. Finance Minister Guido Mantega never misses an opportunity to remark that the index is “within target.”

 

Many analysts say that nobody is shooting for the bull’s eye anymore, something the central bank denies—although even by the bank’s estimates, inflation will remain at the top of the range into next year, fueling criticism that monetary tightening was cut short too soon.

 

Minutes of the meeting that left the Selic unchanged in May showed policy makers were more concerned with Brazil’s weak growth, forecast to be a meager 1.2% this year. Economists say high borrowing costs damp growth, although they sometimes are necessary to rein in price increases.

 

Critics also say government spending cuts would help deflate the economy. Mr. Mantega has said he is doing his part, but analysts doubt he can do much ahead of an election in October in which President Dilma Rousseff is seeking a second term.

 

Thursday’s inflation report is expected to shed some light on the trends that are catching the central-bank’s eye.

 

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