Brazil’s monthly inflation slowed for the second month in a row in March, as government officials work to keep price increases under control, Finance Minister Guido Mantega told reporters today.
Prices probably rose less than the 0.6 percent increase recorded in February, Mantega told reporters in Sao Paulo. Government officials will implement measures to bring inflation to the central bank’s 4.5 percent target, he said.
Since January, Brazilian policy makers have expanded tax cuts, held the benchmark interest rate at record lows and reduced electricity costs to revive economic growth without fueling inflation. Still, annualized inflation accelerated to 6.31 percent in February from 6.15 percent the month prior. Inflation is proving persistent and poses risks, central bank President Alexandre Tombini said this week.
“We will not allow inflation to get out of control,” Mantega said. “We expect food prices, which have been the villain of inflation, to fall to more reasonable levels in upcoming months.”
Swap rates on the contract due in January 2014, the most traded in Sao Paulo today, fell seven basis points to 7.78 percent at 11:26 a.m. local time. The real strengthened 0.6 percent to 2.0037 per U.S. dollar.
Brazil’s government today announced plans to extend in January payroll tax cuts to 14 new sectors including transportation and social communications. The cuts will come into effect next year and will reduce 2014 tax revenue by 5.4 billion reais, Mantega said. Separate payroll tax cuts already planned for this year will be worth 16 billion reais, he added.
Officials also are studying changes in taxes on profits earned by Brazilian companies abroad, Mantega said. Ethanol may be included in additional tax reductions being considered by Brazil’s government.
Latin America’s largest economy will expand by 3.01 percent this year, according to the latest central bank survey of about 100 economists. Year-end inflation will reach 5.71 percent, according to the same study.