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Inflation Drops Again in Brazil to 8.73 % in August

Inflation drops again in Brazil to 8.73 % in August

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Inflation in Brazil slowed again in Brazil and went from 10.07 % year-on-year in July to 8.73 % in August, the lowest since June 2021, thanks to the fall in prices recorded last month, the government reported Friday.

In August, inflation decelerated by 0.36 %, which is the second consecutive drop in the rate after the deflation recorded in July (-0.68 %), according to the Brazilian Institute of Geography and Statistics.

In the first eight months of the year, inflation stood at 4.39%.

As in July, the deceleration of prices was due, in part, to the drop in fuel prices, which fell by 10.28%, due to the reduction of federal taxes approved by the government of President Jair Bolsonaro, who is seeking re-election in the October 2 elections.

Of the nine major groups analyzed by IBGE, two recorded deflation—transportation (-3.37 %) and communication (-1.10 %)—while the rest of the groups rose, including food and beverages (0.24 %) and housing (1.69 %).

The increase in prices recorded in Brazil in recent months has forced the Central Bank to gradually raise official interest rates, which today stand at 13.75 % p.a., their highest level since 2016, and the issuer has given signals that they could raise them to 14 % at their next meeting.

Brazil closed 2021 with inflation of 10.06 %, the highest cumulative rate since 2015, when the index was 10.67 %.

For this year, the Central Bank set an inflation target of 3.50 % with a tolerance margin of 1.5 percentage points, although it has already admitted that it will not be met this year.

According to the estimates of financial market economists, the country will close with an inflation rate of 6.61%, below the 7.11% forecast four weeks ago, while for 2023 an inflation rate of 5.27% is expected.

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