Inflation picks up in July in Brazil and reaches 4.50% annually

Rio de Janeiro. Inflation in Brazil rose 0.38 percent in July and reached 4.50 percent in 12 months, official data showed on Friday in Latin America’s largest economy.

Prices had risen by 0.21 percent in June and the annual figure had reached 3.93 percent, according to the official statistics institute, IBGE.

The rise in transport prices (1.82 percent) had a particular impact on the rise in the Broad National Consumer Price Index (IPCA) last July, a reference for measuring price behavior.

Within this group, gasoline prices soared (3.15 percent) and airline tickets, with an increase of 19.39 percent.

The increase in the residential electricity rate (1.93 percent) and housing rates (0.77 percent) also had an impact.

Prices for food and beverages, meanwhile, fell by one percent.

“In July we have school holidays, which contributed to the increase in airfares. In addition, that month the yellow tariff flag for residential electricity began to apply,” which adjusts prices based on more or less favorable conditions for energy generation in the country, said André Almeida, manager of IPCA, in a statement.

July inflation was slightly above market forecasts of 0.35 percent, according to the average of projections from 41 financial institutions and consulting firms surveyed by the economic daily Valor.

Inflation in July for the 12 months thus reached the ceiling of the Central Bank of Brazil’s target of 3 percent with a tolerance margin of 1.5 percentage points up or down.

The market expects inflation of 4.10 percent for this year, according to the latest Focus bulletin of the Central Bank, published last week.

Rising inflation was one of the arguments used last week by the Central Bank’s Monetary Policy Committee to keep its benchmark interest rate unchanged at 10.5 percent for the second consecutive time, after interrupting a cycle of seven consecutive cuts since August 2023.

The decision was bad news for President Luiz Inácio Lula da Silva, who since coming to power in 2023 has pushed for an accelerated drop in rates to boost growth.