Inflation and the Exchange Rate Movements: What Are the Trends?

BRAZIL ECONOMICS - Report 22 Sep 2014 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

The IPCA-15 in September came as a surprise at 0.39%, a slightly higher rate than the consensus projections and greater than the IPCA for August, which was 0.25%. This brought the IPCA over the past 12 months to 6.62%, versus 6.5% in July, with tradables accumulating an increase of 6.9% in 12 months and non-tradables growing by 7.3% (Graph 1). The surprise in the IPCA-15 was to a large extent caused by the final (and somewhat faster) deflation of food prices, for which the monthly rate rose from -0.15% in August to 0.28% in September. There also was some acceleration in service prices, with inflation over the preceding 12 months reaching 8.6%.

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