Brazil's broadest inflation index rose in August for the first time in three months, signalling continued price pressures in Latin America's biggest economy despite signs of slower growth. The IGP-M index climbed 0.44 percent in August, the Getulio Vargas Foundation research group said on Tuesday, following a 0.12 percent drop in July and 0.18 percent decline in June.
The index was expected to rise 0.42 percent, according to the median forecast of a dozen economists polled by Reuters. Coming the week before the government releases its official August inflation data, and a day before a central bank interest rate decision, the IGP-M data reflect stubborn price pressures dogging Brazil's economy even as its growth outlook dims.
A drop in Brazil's June economic activity, weaker manufacturing data and flagging retail sales have led many economists to forecast weaker growth this year, but the labour market remains tight, fuelling higher wages and spending. Economists surveyed by Reuters unanimously expect the central bank to hold its benchmark Selic rate at 12.5 percent after five rate hikes this year, ending a tightening cycle but not yet easing borrowing costs given inflation concerns. The IGP-M is closely monitored by analysts and investors because it provides a broad look at wholesale and consumer prices in Latin America's largest economy. It also allows investors to watch price trends in the construction industry.
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