Brazil disinflation set to pick-up, economists say after July CPI

Price pressures in Brazil were set to ease, potentially paving the way for central bank interest rate cuts later in 2016 or towards the start of 2017, according to economists.

In non-seasonally adjusted terms, the country´s benchmark consumer price gauge, the IPCA, rose by 0.5% month-on-month in July, as expected.

On the other hand, versus a year-ago the IPCA declined from 8.8% to 8.7%, which was also in line with the consensus forecast.

Food prices drove June´s gain, rising by 1.3% after gains of 0.7% over the previous two months.

Core inflation was still elevated, but the underlying trends in both headline and core inflation had eased "considerably" year-to-date, explained Andres Abadia, senior international economist at Pantheon Macroeconomics.

High unemployment together with structural disinflation meant price pressures were set to recede more quickly, he added.

As temporary supply shocks faded and thanks to the recent strengthening in the country´s currency, the real, then policy rates should come down later in 2016 or during the first quarter of 2017, "depending on fiscal progress and providing inflation expectations remain under control", Abadia said.