Brazil Inflation Now Is Above the Target Ceiling

    Workers in a Brazilian industry

    Workers in a Brazilian industry Brazil official inflation rate, as measured by the National Broad Consumer Price Index (the IPCA), closed out August at 0.25%. In July, the rate had stood at 0.01%, and 0.24% in August last year.

    According to data released by the Brazilian Institute of Geography and Statistics (IBGE), the IPCA has accumulated a 4.02% so far in the year, and 6.41% in the 12-month period – slightly above the target set by the government.

    The climb in August was still driven by housing costs, which, at 0.94%, accounts for over half of the IPCA. The rise in spending on housemaids (1.26%) and electric energy (1.76%) also played a significant role in the figures for August.

    Food prices, however, were reported as having dipped 0.15%. They were the main factor curbing the increase in the IPCA.

    Industrial Activity

    Brazil’s industrial activity was reported to have grown in July by the National Industry Confederation (CNI). The country’s capacity utilization rate expanded 0.6 percentage points – 81% against the 80.4% registered in June. It is the first increase after four years of decline.

    The hours worked in industrial production went up 2.6% compared to June, and the real turnover climbed 1.2% in the same comparison.

    As for the employment and the salaries paid in the sector, both experienced a 0.2% drop, but the worker’s average real revenue hiked 0.1%.

    The confederation argues that in spite of the heightened number of hours worked, the turnover and the use of the industrial complex, the current scenario is still warming up, inasmuch as the labor market faced its fifth consecutive fall in July.

    Key Interest

    The Central Bank confirmed projections for the stock market and keeps the SELIC rate, which represents the economy’s benchmark interest, at 11% per annum. The decision was made unanimously and was announced by the bank’s board of directors.

    The increasing basic interest rate was brought to a halt in May by the bank after nine months on the rise.

    In a statement, the bank says the decision to maintain the rate considered the evolution in the macroeconomic scenario as well as predictions for the inflation. The analysts heard by the Central bank believe the rate will close out the year unaltered.

    The SELIC is used by the Central Bank to keep the official inflation rate (IPCA) within the target of 4.5% per annum, plus or minus two percentage points.

    In July, the IPCA stood at 6.5% in 12 months, reaching the ceiling set by the bank.

    Bonds

    Brazil’s National Treasury announced the sale of government bonds in the US and European markets totaling US$ 1 billion, with yield at 3.88% per annum. The spread (difference between the price at which a share is bought and sold) was 147 basis points above US Treasury bonds.

    The operation was carried out by banks BTG Pactual, Citigroup and Morgan Stanley.

    Analysts from the Treasury had announced earlier the float at 103.05% of bonds’ face value.

    The National Treasury stated that the bonds may be further offered to the Asian market in at a total of US$ 50 million, under the same conditions.

    The outcome of the issuance will be disclosed after its conclusion.

    ABr

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