Brazil will cut federal taxes on basic foods in a bid to tame inflation, after a report showed today consumer prices rose more than analysts forecast for an eighth straight month, according to a government official with knowledge of the decision.
President Dilma Rousseff will announce the measure in a nationally-televised speech tonight, said the official, who asked not to be named because the decision isn’t public yet.
A weaker currency, record low borrowing costs and $23 billion in tax cuts failed to kick-start the economy last year. Instead, the measures helped fuel inflation. By cutting taxes on food, Rousseff will rein in consumer prices at the same time that she stimulates the economy, the official said.
Consumer prices rose 0.6 percent in February, above the 0.49 percent forecast from 44 analysts surveyed by Bloomberg, the national statistics agency said in Rio de Janeiro today. Annual inflation quickened to 6.31 percent and has exceeded the central bank’s 4.5 percent target for 30 months. Economists forecast 2013 inflation at 5.7 percent, according to the median estimate in the most recent central bank survey.