Tags: Brazil | inflation | World Cup | Rousseff

World Cup Pushes Brazil June Inflation Over Economists' Forecast

Tuesday, 08 Jul 2014 08:52 AM

Brazil’s consumer prices slowed less than expected in June, as the World Cup soccer tournament boosted the cost of hotel stays and airline flights.

Inflation as measured by the benchmark IPCA index slowed to 0.40 percent from 0.46 percent in May, the national statistics agency said today in Rio de Janeiro. That was faster than the median forecast of 0.39 percent from 35 analysts surveyed by Bloomberg. Annual inflation quickened to 6.52 percent, versus a forecast of 6.51 percent.

President Dilma Rousseff’s administration is holding down regulated prices to tamp inflation that’s eroding consumer confidence ahead of October elections. Her efforts weren’t enough to keep consumer price increases last month from breaching the government’s target range for the first time this year. Following the longest rate-raising cycle in the world, the central bank in May kept borrowing costs unchanged after first- quarter growth slowed from the previous three months on reduced consumption and falling investment.

Swap rates on the contract due January 2017, the most traded in Sao Paulo today, fell three basis points, or 0.03 percentage point, to 11.38 percent at 9:08 a.m. local time. The real strengthened 0.1 percent to 2.2228 per U.S. dollar.

Air Fares

Food and beverage prices contracted 0.11 percent in the month after increasing 0.58 percent in May. Personal expenses rose 1.57 percent, due to a 25.33 percent jump in hotel prices associated with the June 12-July 13 World Cup, the statistics agency said in today’s report. Air fares rose 21.95 percent in June. Air fares and hotel stays together accounted for half the increase of consumer prices in June.

Regulated prices rose 3.95 percent in the 12 months through June versus 4.09 percent in May. Prices of services increased 9.2 percent in the same period.

The central bank last month extended until year-end a program to bolster the real after it appreciated 6.7 percent in the first half of the year, more than all other major currencies tracked by Bloomberg. The bank is offering as much as $200 million in foreign exchange swaps auctions daily, as a stronger currency decreases the cost of some imports.

Key Rate

The central bank board held the key interest rate at 11 percent in its last monetary policy committee meeting after boosting it by 3.75 percentage points in the year through April. Policy makers, who target inflation of 4.5 percent plus or minus two percentage points, are scheduled to make their next rate decision on July 16.

Analysts surveyed on July 4 by the central bank estimate inflation will moderate to 6.46 percent by year-end as growth slows to 1.07 percent from 2.49 percent last year. Gross domestic product expanded 0.2 percent in the first quarter following a 0.4 percent expansion in the last three months of 2013. Consumer confidence as measured by the Getulio Vargas Foundation rose in June from its lowest level in more than five years.

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Brazil's consumer prices slowed less than expected in June, as the World Cup soccer tournament boosted the cost of hotel stays and airline flights.
Brazil, inflation, World Cup, Rousseff
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2014-52-08
Tuesday, 08 Jul 2014 08:52 AM
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