Brazil Inflation Cools To 5.13% Yoy, Raising Hopes For Rate Cuts

(MENAFN- The Rio Times) Brazil released fresh inflation data for August, offering relief to households and markets as consumer prices slowed more than expected, while still remaining above the central bank's target.

The official consumer price index (CPI) rose 5.13% year-on-year, easing from 5.23% in July and broadly in line with forecasts of 5.10%.

On a monthly basis, CPI contracted -0.11%, a sharper pullback compared to July's +0.26%, though slightly better than expectations of -0.15%.

The seasonally adjusted IPCA inflation index also posted a -0.04% decline in August, reversing July's strong +0.35% gain. The negative reading signals weaker underlying momentum in prices, reflecting moderation in food and energy costs.

The Thomson Reuters/Ipsos Primary Consumer Sentiment Index (PCSI) for Brazil remained at 51.04 in September. The stability of the index, still above the neutral 50 mark, highlights resilience among Brazilian households despite inflation pressures and volatility in currency markets.



Investors are awaiting updated foreign exchange flow data later in the week. The last report showed a net outflow of USD -0.231 billion, underscoring external financing challenges that could weigh on the real.

Sustained outflows may complicate any monetary easing by putting pressure on the currency. The slowdown in inflation strengthens the case for the Central Bank of Brazil (BCB ) to consider starting an easing cycle.

Still, policymakers remain cautious, as inflation at 5.13% is above the official target band. Traders will closely monitor September's mid-month IPCA-15 print for confirmation of a broader disinflation trend.

Today's numbers offer a measure of relief for consumers and markets, signaling that Brazil's inflationary wave is losing momentum. Yet with risks tied to global commodities and capital flows, the central bank's path forward will likely remain cautious.

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