Brazil’s 12-month inflation rate fell sharply in January, raising expectations for steep cuts in interest rates. Monthly inflation in January was 0.38 percent, up slightly from 0.3 percent in December, but still historically low for the first month of the year. January is typically a month for high inflation because of annual hikes in public transportation, utilities and services such as health and education. The 12-month inflation rate as of January fell to 5.35 percent from 6.29 percent as of December. Economists are now predicting 2017 inflation at or even below the government-set goal of 4.5 percent. The downward trend for inflation could also cause the Central Bank to accelerate its monetary loosening policy. The bank has already cut its base rate from 14.25 percent to 13.0 percent. Many economists are now predicting a single-digit base rate by the end of the year. Lower interest rates, in turn, should help stimulate business investment and consumer purchases.
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