IPCA-15 has deflation of 0.07% in July, says IBGE – 07/25/2023 – Market

The IPCA-15 (National Consumer Price Index Broad 15) fell by 0.07% in July, according to data released this Tuesday (25) by the IBGE (Brazilian Institute of Geography and Statistics).

The decline was greater than the median of market projections. Analysts consulted by the Bloomberg agency projected deflation (low) of 0.02%, after the slight advance of 0.04% registered by the index in June.

The new result marks the first low in ten months, since September 2022. At the time, the retreat had been 0.37% under the impact of the Jair Bolsonaro (PL) government’s tax cuts close to the presidential elections. Then there were nine advances in a row.

With the variation of July, the accumulated increase in 12 months by the IPCA-15 reached 3.19%, informed the IBGE. In this clipping, the advance was 3.40% until June.

The official inflation index in Brazil is the IPCA (National Consumer Price Index), also released by the IBGE.

As the IPCA variation is calculated over the reference month, the result for July has not yet been finalized. It will be known on the 11th of August.

The IPCA-15, due to the fact that it was released earlier, signals a trend for prices. Its change is collected between the second half of the previous month and the first half of the data reference month – in this case, June and July.

In the June IPCA, the most recent available, the fall in prices was 0.08%. It was the first deflation of the official index in nine months, since September 2022.

After the result, some analysts began to see more chances of the IPCA ending the year within the BC (Central Bank) inflation target ceiling. It’s something that was off the radar at the beginning of the year.

The center of the target pursued by the monetary authority is 3.25% in 2023, with a tolerance of 1.5 percentage points for more (4.75%) or less (1.75%). The IPCA broke the ceiling in 2021 and 2022.

The release of the IPCA-15 takes place on the eve of the new BC Copom (Monetary Policy Committee) meeting. The meeting is scheduled for next week, on the 1st and 2nd of August.

With the truce of inflation, President Luiz Inácio Lula da Silva (PT) and allies have been pressuring the BC to cut the basic interest rate, the Selic. Currently, the Selic is at 13.75% per annum.

Analysts predict that the Copom will start the rate reduction cycle at the next meeting. The main doubt in the projections is about the intensity of the cut – 0.25 percentage point or 0.5 percentage point.