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Brazil’s consumer prices expected to increase at a quicker pace in September, according to forecasts.

Brazil’s Consumer Prices Expected to Rise in September, Fueled by Gasoline Costs

Brazil’s Inflation Outlook

Brazil’s consumer prices are anticipated to have increased at a faster pace in September, primarily driven by the surge in gasoline costs. This rise in inflation is projected to bring the annual inflation rate to its highest level in seven months, according to a recent Reuters poll of economists.

Inflation Figures and Factors

The upcoming release of the IPCA inflation index is expected to reveal a 0.34% gain in September compared to August, with a yearly increase of 5.27%. This would mark the quickest rate of inflation since February. Economists attribute this acceleration to the rising costs of gasoline, while noting that industrial goods prices have remained relatively low and services have maintained acceptable levels.

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Impact of Fuel Prices and El Niño

Brazil’s state-run company Petrobras has been adjusting fuel prices in response to international oil market fluctuations. The recent conflict in Israel has added further volatility to the situation. Additionally, concerns are arising from the potential impact of the El Niño weather pattern on agricultural output, as it has already posed threats to crops in various countries, including Australia and India.

Inflation Expectations and Economic Outlook

Higher oil prices, weather-related risks, Brazil’s fiscal challenges, and increasing U.S. yields have contributed to inflation expectations remaining slightly above the desired levels. The consensus forecast for this year’s inflation rate stands at 4.86%, potentially surpassing the official goal of 3.25% plus or minus 1.5 percentage points for 2023.

Monetary Policy and Economic Uncertainty

The eruption of violence in the Middle East has added to the external challenges faced by Brazil’s central bank. However, policymakers remain committed to reducing borrowing costs. The Banco Central do Brasil intends to continue implementing small rate cuts while closely monitoring any potential resurgence of inflationary pressures.

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Overall, Brazil’s economic performance this year has been surprisingly positive, but uncertainties regarding 2024 have emerged. Analysts suggest that inflation may have peaked in September and could gradually decline thereafter, barring any significant impact from El Niño.

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