According to a Reuters survey of economists, the inflation rate in Brazil is likely to have remained moderate in January. It stayed below the upper limit of the target range set by the central bank for a second month running.
This anticipated result has boosted expectations that Banco Central do Brasil could start cutting rates as early as March.
The median annual inflation estimate increased to 4.44% from 4.26% between 4 February and 9 February, according to an interview of 20 economists.
The projection, despite the rise, would remain below the target ceiling set by the central bank of 4.50%. This is based on a 3% centre and includes a tolerance range of up to 1.5 percentage points.
Only one of the estimates in the poll exceeded the official maximum 4.5%.
IBGE, the Brazilian statistics agency is expected to release its January report on Tuesday.
Prices increase due to health and personal care costs
The consumer price index is expected to increase by 0.32 percent in January. This is slightly less than the 0.33 percent rise in December.
The advance was largely due to the health services and personal-care products that showed a notable increase in an inflation rate reading biweekly.
According to the data collected through the middle of January, the personal hygiene category, which includes products for skin care, saw an increase by 1.38 percent.
Analysts pointed out, in addition to the secondary categories, that it is likely changes in administrative prices contributed.
The study included comments from the market that predicted a decrease in electricity prices would be offset by higher gas taxes and increases in fares for public transport.
Energy relief is offset by fuel taxes and transportation costs
The recent reductions in fuel prices by Petrobras, the state-owned oil firm, were offset by an increase in freight taxes, which account for a significant portion of the final price.
Transport costs continue to push headline inflation upwards.
the same time, the basket of consumer goods also contained the price increase.
The price of industrial and semiprocessed products also fell, which helped to keep the inflation rate in check.
The large crop last year has further reduced the upward pressure on prices.
In addition, the economic slowdown in recent years has limited the ability of manufacturers to increase prices. This helps keep inflation under control.
The labour market continues to constrain service inflation
Even though pressures on goods have decreased, analysts expect the disinflation of services to be more gradual.
The tight labour market, and the persistent wage pressures are believed to be limiting price moderating in this sector.
Analysts noted that an increase in the exchange rate stability, a decrease in inflation inertia and a slower economic growth should help to ease the services inflation throughout the year.
The currency appreciation of the past year has led to a significant decline in inflation.
The strongest currency in Latin America was supported by high interest rates, which attracted capital and eased pressure on imports.
Updates may alter the post Brazil Inflation Staying Below Target Ceiling, Reinforcing Case for Rate Cut in March.
