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Brazilian Real shows signs of deflation

Brazilian Real

Between the Euro and the USD, most currencies are currently experiencing harsh inflation as the global market gets flooded with stimulus and bailout packages. One country in South America however, is now experiencing a decline in inflation, posing a new opportunity for currency traders. Business Week reports on the recent fluctuation of the Brazilian Real:

Brazil’s inflation rate in June fell to the lowest level in nearly two years as economic growth falters in the face of the European debt crisis, opening room for the central bank to continue cutting interest rates.

Consumer prices, as measured by the benchmark IPCA index, rose 0.08 percent in June from a month earlier, the smallest jump since a 0.04 percent increase in August 2010, the government’s statistics agency said in Rio de Janeiro today. The median estimate from 48 economists surveyed by Bloomberg was for inflation of 0.13 percent. Prices in June rose 4.92 percent from a year earlier, the lowest annual increase since September 2010.

Brazil’s annual inflation has slowed from 7.31 percent in October 2011, while remaining above the central bank’s 4.5 percent target since September 2010. Central bank President Alexandre Tombini has repeatedly said inflation will converge to the target by year-end even as the government attempts to kick the economy into gear with stimulus spending, tax cuts and lower borrowing costs.

Three of nine consumer price categories experienced deflation in June, led by a 1.18 percent decline in transportation costs that reflected lower gasoline prices.

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