Brazil's Inflation Extends Downtrend In Mid-September On Lower Fuel Prices

• Brazil's consumer prices extended their downward trend during in the month to mid-September, government statistics agency IBGE said on Tuesday, as fuel costs continued to drop on the back of lower taxes and price cuts by state-run oil firm Petrobras.
• Inflation in the 12 months to mid-September hit 7.96%, well below the 8.14% forecasted by economists, likely backing the central bank's recent decision to pause its aggressive rate hiking cycle.
• In August, Latin America's largest economy posted the lowest mid-month inflation rate in about three decades; however, this month's drop was driven by the transportation sector, in which costs fell 2.35%.
• Notably, the inflation drop in September was not widespread as prices fell in only three of the nine groups of products and services surveyed - communication, food and beverages, and transportation.
• The latest inflation data comes as Brazil's central bank last week chose to keep interest rates unchanged at 13.75%, pausing an aggressive tightening after 12 consecutive increases aimed at curbing high inflation.
• William Jackson, the chief emerging markets economist at Capital Economics, said the inflation figures confirmed that the monetary tightening cycle was over. “However, the fact that inflation remains very strong supports our view that the central bank will wait until the middle of next year before turning to interest rate cuts," he added.

(Source: Reuters)