Lower consumer inflation expectations in February
In February, median inflation expectations among Brazilian consumers for the next 12 months dropped 0.1 percentage point compared to January, down to 4.9%. This is the lowest value on record since July 2007 (4.8%), according to FGV’s Brazilian Institute of Economics (IBRE). The index dropped 0.5 percentage point year over year.
“Median consumer inflation expectations for the next 12 months has been steadily dropping in the last four months, including after the election period. More favorable expectations (i.e. lower inflation) have been driven by the fact that consumers are more optimistic and less uncertain about the country’s economic situation. This index should stabilize and only show minor variations over the next few months, considering the economy’s gradual recovery”, said Viviane Seda Bittencourt, Coordinator of IBRE’s Consumer Survey.
By breaking down the frequency of expected inflation in ranges, the percentage of consumers estimating values within the tolerance limits (2.75% to 5.75%) of the inflation target set for 2019 dropped from 61.4% in January to 60.5% in February. Nonetheless, this still shows that most consumers have anchored expectations. The ratio of consumers expecting values above the lower limit (2.75% to 4.25%) rose 0.3 percentage point, up to 40.4%, while those expecting inflation to remain within the upper limit (4.25% to 5.75%) dropped from 21.3% to 20.1%.
The analysis by income range reveals that the drop in February was led by households with monthly income of up to BRL 2,100.00. Inflation expectations for the next 12 months among these consumers dropped 0.7 percentage point, down to 5.4%. Expectations remained stable among other income ranges.
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