Brazil Inflation Continues to Simmer Down

Brazilian prices notched up only slightly in August, leaving the annual inflation rate of 2.46 percent the lowest for 18 years, the government statistics office said Wednesday.

Latin America's biggest economy is inching out of its deepest recession in history and steadily falling inflation is allowing the central bank to slash the previously sky high basic interest rate, with a new cut expected when the bank meets later Wednesday.

The IBGE statistics office said prices rose 0.19 percent in August from July, which had registered a hike of 0.24 percent. That followed the previous month's price drop of 0.23 percent -- the first decline since 2006.

The August figures came in lower than market expectations of a 0.32 percent hike, according to a survey by the Valor daily. 

By contrast, prices rose 0.44 percent in August of 2016.

The 2.46 rate for accumulated inflation in the previous 12 months through August this year was the lowest since 1999.

Leading downward pressure were cheaper food and drinks, down 1.07 percent, and communications, down 0.56 percent, the IBGE said. However, transport costs rose 1.53 percent and housing 0.57 percent.

Back in 2015 Brazil saw inflation of 10.67 percent, followed by 6.2 percent in 2016.

The overall steady decline in prices points to continued interest rate cuts as the central bank tries to kickstart the moribund economy. Although unemployment is finally receding, it remains painfully high at 12.8 percent.

The key Selic rate is currently at 9.25 percent -- down from 14.25 percent in October last year -- and the market expectation is for a further one percentage point cut to 8.25 percent on Wednesday.