Brazil inflation drops below 8 pct for the first time since February 2015, opens door to small rate cuts

Consumer inflation in Brazil fell below 8 percent for the first time since February 2015 during the period of October, paving way for small rate cuts this year as lower prices start to exert pressure on the country’s central bank.

Prices rose 7.87 percent in the 12 months through October, down from an annual increase of 8.48 percent in the previous month, data released by statistics bureau IBGE showed Wednesday.  The inflation rate was slightly lower than the median forecast of 7.90 percent in a Reuters poll.

Prices rose 0.26 percent from September, the lowest monthly increase for October since 2000, IBGE said. With inflation on a downward path, the central bank cut interest rates last month from a decade high to help lift the economy out of a two-year downturn.  

Prices in the food and beverages section fell -0.05 percent in October, from -0.29 percent in September, while housing inflation eased 0.42 percent, from 0.63 percent in September. Transport prices recovered 0.75 percent last month, compared to -0.10 during the previous month, data showed.

Economists expect the bank to lower its benchmark interest rate by at least 25 basis points later this month. A steeper cut is possible but would depend on a faster drop in prices for services, the central bank has reiterated in recent weeks, Reuters reported.