Brazil’s annual inflation eased in July, broadly in line with market expectations, data from statistics agency IBGE showed on Tuesday, returning to the central bank’s tolerance range as the effects of tight monetary policy continued to filter through the economy.

Inflation Rate

Consumer prices in Latin America’s largest economy rose 4.44% in the 12 months through July, down from 4.64% in June, IBGE said. Economists polled by Reuters had expected annual inflation of 4.40%.

The reading put inflation back within the central bank’s target range, centered on 3% with a tolerance band of 1.5 percentage points on either side after two months above the target.

Brazil’s central bank cut its benchmark by 25 basis points for a fourth straight meeting to 14.00% earlier this month, leaving its next steps open.

Pantheon Macroeconomics’ chief Latin America economist Andres Abadia said that while inflation has shown signs of easing, a lasting convergence toward the central bank’s 3% target is unlikely before 2027, with inflation projected to end this year above the target range.

On a monthly basis, consumer prices rose 0.07% in July, slowing from 0.16% in June, but coming in slightly above the 0.03% increase forecast by economists in the Reuters poll.

Higher housing costs led by electricity prices were partly offset by a decline in food and beverage prices, the largest component of Brazil’s consumer price index, which fell 0.67% during the month, IBGE said.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.