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Brazil’s mid-month inflation index snaps deflationary streak

Prices rose in October according to the IPCA-15, Brazil’s mid-month inflation index — considered to be a reliable predictor of official inflation. Prices saw a 0.16-percent rise after two months of deflation, putting an end to a three-month slowdown streak.

The IPCA-15 came in higher than expected by the market, which had predicted a slight bump of just 0.05 percent, per financial data provider Refinitiv. The mid-month inflation rate is up by 4.8 percent year-to-date and at 6.85 percent year-on-year.

Transportation was once again the segment which weighed most heavily on the index. Driven by lower fuel prices (-6.14 percent), the transportation segment kept the overall index from rising further. Experts believe, however, that the effects of lower transportation prices will lose steam in the coming months.

Deflation has been largely anchored in artificial pillars — such as government intervention to cap state-levied taxes on energy and transport which ended up taming fuel prices. That is part of the reason why markets believe inflation will remain around the 5.6-percent mark next year.

The healthcare and personal care segment, meanwhile, saw a 0.8-percent increase in prices, due to a bump in insurance premiums which kicked in with a retroactive effect. “Today’s results account for rises relating to the months of July, August, September, and October,” notes Brazil’s official statistics agency, IBGE.

Food prices also went up (0.21 percent). This segment disproportionately affects low-income families, for whom food products weigh heavier on the basic basket of goods. In September, the official food inflation saw its first drop since November 2021.

But considering the rise in food prices registered in the IPCA-15 index, this trend may be short-lived.

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