Brazil inflation rises in challenge for new bank chief

BRASÍLIA, June 8, 2016 (AFP) – Brazil’s annual inflation rate crept up last month to 9.32 percent, officials said Wednesday, sounding new alarm bells for Latin America’s largest economy as it struggles through a deep recession.

The stubbornly high inflation rate had been looking somewhat better recently, falling in each of the past three months, to 9.28 percent in April.
The new rise underlines the challenges facing interim president Michel Temer and new central bank governor Ilan Goldfajn, who are battling to restore confidence in the sputtering economy.

Goldfajn has said reining in prices will be his top priority.

“The central bank’s first contribution to Brazilian society is to maintain a low and stable level of inflation,” he told the Senate’s economic affairs committee Tuesday.

The central bank has a inflation ceiling target of 6.5 percent.

The bank is expected to leave its benchmark interest rate unchanged at 14.25 percent later Wednesday.

And Goldfajn is not expected to rush to cut it from that level, the highest in nearly a decade.

Brazilian policy makers face the tricky challenge of rising prices and a shrinking economy, which contracted 3.8 percent last year — the worst performance in 25 years — and another 0.3 percent in the first quarter of 2016.

The recession has been exacerbated by political uncertainty in Brasilia, where suspended president Dilma Rousseff is facing an impeachment trial on charges of fiddling with the government’s accounts, and a massive corruption scandal centered on state oil giant Petrobras has shaken the political establishment.