August 23, 2018 / 12:57 PM / 2 months ago

UPDATE 1-Brazil inflation cools in mid-August as strike effect fades

 (Recasts throughout with details, context)
    By Bruno Federowski
    BRASILIA, Aug 23 (Reuters) - Brazilian inflation cooled in
mid-August, largely in line with expectations, as pressure
stemming from a nationwide truckers' strike earlier in the year
faded.
    The reading highlights the challenges facing the central
bank as it tries to kick start price hikes in a weak economy.
Brazil's tepid economic recovery is likely to prompt the bank to
hold interest rates at an all-time low for quite a while.
    Consumer prices tracked by the benchmark IPCA index rose
0.13 percent from the month before, government statistics agency
IBGE said on Thursday, the smallest monthly increase since the
end of March.             
    That brought the year-over-year rate down to 4.30 percent
from 4.48 percent at the end of July, edging further below the
midpoint of the central bank's target range of 4.5 percent plus
or minus 1.5 percentage points.             
    Economists polled by Reuters had expected rates of 0.11 and
4.27 percent, respectively.
    The results suggest product shortages stemming from the
late-May trucker protests, which blocked key roadways and
plugged flows to major industries, have nearly normalized.
    The deceleration could have been even steeper had it not
been for scarce rains, which weighed on hydropower generation
and pushed up electricity costs 3.59 percent.
    Meanwhile, double-digit unemployment rates and widespread
idle capacity among companies have kept a lid on underlying
price pressures even as the Brazilian real        plummeted to a
2-1/2 year low, bumping up import costs.
    Economists say that should give the central bank wide space
to hold rates to support the sluggish economic recovery, which
is likely to curb any pass-through of a weaker currency to
inflation.

 (Reporting by Bruno Federowski
Editing by Frances Kerry)
  
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