IPCA Inflation Rises 0.25% in August, Tops Target Ceiling

Brazil’s IPCA consumer price index accelerated 0.25 percent in August, pushed by strong energy price increases during the period, the IBGE statistics institute reported. The surge in inflation put 12-month inflation at 6.51%, just above the country’s 6.5% target ceiling, The IBGE said that in addition to energy prices, housing, transportation, education and health care costs also weighed on the index. Food costs, however, declined slightly during the month. Brazil’s government has struggled to rein in strong inflation this year prompted by poor climate conditions and low rainfall at the country’s hydroelectric facilities that have prompted electricity rate increases of more than 30% in some regions. In reaction to accelerated inflation, Brazil’s central bank in 2013 and early this year raised the country’s base Selic interest rate more than 3 percentage points to 11%, but has since suspended rate hikes to try to avoid low economic growth. According to recent central bank market surveys, IPCA consumer price inflation is seen ending 2014 at around 6.5%, while the economy is expected to grow by only about 0.5%.