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Inflation Rate Significantly Decreases, Taking Analysts by Surprise

04/11/2018 - 10h58

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ANAÏS FERNANDES
FROM SÃO PAULO

Brazil's official inflation rate significantly decreased in March, strengthening the view that the Central Bank has enough room to further decrease interest rates.

The Brazilian Institute of Geography and Statistics (IBGE) reported on Tuesday (the 10th) that the Broad Consumer Price Index (IPCA) went up by 0.09% in March, well below the 0.32% that had been registered in February of this year, as well as the 0.25% increase in March of 2017.

During the 12 months leading up to March, the index rose 2.68%, but when the cutoff point was February the index climbed to 2.84%. Either way, the rate is well below the floor of the inflation target that was stipulated at 4.5%, with a margin of plus or minus 1.5 percentage points.

This was the lowest inflation rate for the month of March ever since the Real currency was introduced in 1994, falling below the expectations of economists who participated in a Reuters survey and had predicted a monthly increase of 0.12% and a yearly increase of 2.71%.

"Our impression is that there is still some uncertainty when it comes to the directions the economy could go in," said Fernando Gonçalves, who oversees the IPCA index.

"There is still economic instability due to unemployment and income. Some people are still insecure when it comes to spending," Mr. Gonçalves said.

The Central Bank (BC) has already cut the basic interest rate (Selic) to a historic low - a yearly rate of 6.5% - and it has indicated that it may reduce it even further in May, before the adjustment period comes to an end.

The decrease in terms of the March IPCA rate is mainly due to the reduction of airfare prices, which are on average 15% cheaper.

Translated by THOMAS MATHEWSON

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