SAO PAULO (Reuters) -Brazil’s inflation undershot market expectations in July, data from statistics agency IBGE showed on Tuesday, with a monthly drop in food prices providing some relief even as the annual rate remained well above the central bank’s target.
Consumer prices in Latin America’s largest economy rose 0.26% in July, the agency said, ticking up from 0.24% in the prior month but below the 0.37% increase forecast by economists polled by Reuters.
Prices were up 5.23% in the 12 months through July, IBGE added, down from 5.35% in the previous month. Market participants had expected the annual rate to come in at 5.33%.
Brazil’s central bank in July interrupted an aggressive tightening cycle that had added 450 basis points to its benchmark interest rate, bringing it to nearly a 20-year high of 15%, in a bid to tame persistent inflation.
Policymakers at the central bank have vowed to bring inflation back to the official 3% target, forecasting borrowing costs to remain at a “very restrictive” level into next year.
The official goal has a tolerance band of plus or minus 1.5 percentage points, but the upper end of that range has now been exceeded for 10 consecutive months.
Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, said the July figures indicate that restrictive monetary policy is starting to deliver results. “Headline pressures are easing gradually,” he noted.
The monthly price rise was driven by higher housing costs as electricity prices surged, IBGE said. On the other hand, closely watched food and beverage prices fell for the second month in a row. Apparel and communication costs were also down.
(Reporting by Gabriel Araujo; Editing by Paul Simao)
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