Tag Archives: Inflation

Venezuela says inflation 274 percent last year, economists say far higher

People line up outside a branch of Italcambio currency exchange in San Cristobal, Venezuela March 24, 2017. REUTERS/Carlos Eduardo Ramirez

By Girish Gupta and Corina Pons

CARACAS (Reuters) – Annual inflation in crisis-hit Venezuela last year reached 274 percent, according to data the central bank provided to the International Monetary Fund, although many economists believe the true figure is far more alarming.

In the midst of a bruising economic crisis, the leftist government of President Nicolas Maduro has not published inflation data for more than a year.

Venezuelan consultancy Ecoanalitica says inflation was 525 percent last year and New York-based investment bank Torino Capital – using one popular food item as a proxy – put it at 453 percent.

Maduro himself last year increased the minimum wage by 454 percent, saying the rise was to offset inflation.

The central bank did not immediately respond to a request for information.

A wave of anti-government unrest is underway across the country. Hundreds of thousands of people took to the streets on Wednesday, only to be dispersed with tear gas and water cannons.

One factor for high inflation is Venezuela’s soaring money supply, up more than 200 percent in the last year, its fastest rise since records began in 1940.

Purchasing power has eroded and salaries annihilated as a result. On the black market, $1,000 in savings when Maduro was elected in 2013 would now be worth less than $5.

The bolivar currency fell further against the U.S. dollar on Thursday and is now at its lowest value ever against the dollar, down 99.5 percent since Maduro came to power.

Inflation is one facet of the OPEC member’s crippling economic crisis, as it contributes to putting basic food products out of reach for millions. Maduro blames the problems on an “economic war” being waged against it by the U.S. government and opposition “terrorists.”

Many economists blame strict currency and price controls.

The IMF figure places Venezuela as the country with the second highest inflation in the world, after South Sudan which last year clocked inflation of 480 percent. The IMF did not receive Gross Domestic Product data from Venezuela’s central bank.

(Reporting by Girish Gupta and Corina Pons; editing by Alexandra Ulmer and Grant McCool)

Venezuela’s Maduro jeered by crowd as unrest grows

Demonstrators clash with riot police while ralling against Venezuela's President Nicolas Maduro's government in Caracas,

By Maria Ramirez and Alexandra Ulmer

SAN FELIX, Venezuela/CARACAS (Reuters) – Angry Venezuelans threw objects at President Nicolas Maduro during a rally on Tuesday, as protests mount against the unpopular leftist leader amid a brutal economic crisis and what critics say is his lurch into dictatorship.

State television footage showed a crowd mobbing the vehicle that Maduro was standing on as he waved goodbye at the end of a military event in San Felix, in the south-eastern state of Bolivar. Amid the commotion, people threw objects at Maduro, who was wearing a traditional Venezuelan suit and a yellow-blue-red presidential sash, while his bodyguards scrambled.

The state broadcaster then halted transmission.

In a separate video shared on social media, voices yelling “Damn you!” were heard as the vehicle apparently transporting Maduro, a former bus driver and union leader, tried to make its way through the crowd.

Five males, aged 15, 17, 18, 19 and 20, were arrested for throwing “sharp objects” against Maduro’s vehicle, according to a report by a local National Guard division seen by Reuters on Tuesday night.

Further details were not immediately available. The Information Ministry did not respond to a request for information, although Socialist Party officials tweeted that Maduro had been received by a cheering crowd in San Felix.

However, the opposition, which has been protesting in the last two weeks to demand early elections, pounced on the incident as evidence that Maduro is deeply despised amid food shortages and spiraling inflation.

“The DICTATOR only needs to leave Miraflores (presidential palace) to see how the people repudiate him!” opposition lawmaker Francisco Sucre, from the state of Bolivar, said on Twitter amid a flurry of commentary on social media.

“They cannot give a standing ovation to the man responsible for the worst humanitarian crisis in our history!” Sucre added.

The incident drew immediate parallels with last year, when authorities briefly rounded up more than 30 people on Margarita island for heckling Maduro, a rare sight given that the president’s appearances typically are carefully choreographed and show only cheering supporters wearing red shirts.

Videos published by activists at the time showed scores of people banging pots and pans and jeering Maduro during a visit to inspect state housing projects. Authorities later accused opponents of “manipulating” videos.

Venezuela's President Nicolas Maduro (2nd L) in San Felix, Venezuela

Venezuela’s President Nicolas Maduro (2nd L) in San Felix, Venezuela April 11, 2017. Miraflores Palace/Handout via REUTERS

TWO DEATHS

Venezuela’s opposition on Tuesday pilloried what it says is repression during anti-Maduro protests after authorities confirmed a second death in unrest in the last week.

The state prosecutor’s office said in a statement on Tuesday that a 20-year old man had been fatally shot in the neck on Monday night at a protest in the city of Valencia. Opposition lawmakers said the man, Daniel Queliz, was killed by security forces while he was protesting.

His death comes on the heels of the killing of 19-year-old Jairo Ortiz on the outskirts of Caracas on Thursday in the area of an opposition protest. A police officer has been arrested.

After years of protesting with little results, street action had ebbed until a Supreme Court decision in late March to assume the functions of the opposition-led congress sparked outcry, with condemnation at home and abroad.

The court quickly overturned the most controversial part of its decision. News that the national comptroller on Friday had banned high-profile opposition leader Henrique Capriles from office for 15 years drew broad criticism, too.

Venezuelans have been suffering food and medicine shortages for months, leading many to skip meals or go without crucial treatment.

Opposition leaders announced another round of protests in Venezuela’s more than 300 municipalities for Thursday, saying scattered demonstrations would stretch security forces thin.

Maduro says that under a veneer of pacifism, the opposition is actually encouraging violent protests in a bid to topple his government.

State officials via social media have shown images and videos of demonstrators vandalizing public property and throwing rocks at police.

“Who is taking responsibility for damage to public property and persons?” Defense Minister Vladimir Padrino said on Twitter, posting pictures of demonstrators kicking police officers and breaking into an office of the Supreme Court. “What is their agenda? Terrorism, chaos, death?”

Most of the protesters are peaceful and say street action is their only option after authorities last year blocked a recall referendum to remove Maduro. Local elections, due last year, have yet to be called.

Still, many Venezuelans are pessimistic that street protests will yield any change, while others abstain out of fear of violence or because they are too busy searching for food.

(Additional reporting by Brian Ellsworth and Diego Ore; Writing by Alexandra Ulmer; Editing by Lisa Shumaker and Leslie Adler)

Mexico inflation rises at fastest pace in nearly eight years

FILE PHOTO: A general view of a market in Mexico City, Mexico, January 11, 2017. REUTERS/Tomas Bravo

MEXICO CITY (Reuters) – Mexican annual inflation rose at its fastest pace in nearly 8 years in early March, prompting central bank chief Agustin Carstens to hint at higher interest rates to combat an inflation “bubble” he said would subside later in the year.

The headline inflation rate for the year through mid-March was 5.29 percent <MXCPHI=ECI>, the national statistics institute said on Thursday. The figure was the highest since the second half of February 2009, and was above expectations of economists polled by Reuters for 5.25 percent.

Mexico’s central bank raised its benchmark interest rate last month to a nearly eight-year high after a steep hike in gasoline prices and weakness in the peso sparked by Donald Trump’s election as U.S. president.

Just after the data was published, Carstens said the central bank had room to continue adjusting rates.

The peso has recovered as U.S. officials have taken a more conciliatory tone toward Mexico and the U.S. Federal Reserve said it would stick to gradual interest-rate increases.

Still, many analysts expect the central bank to lift rates again on March 30 following the Fed as inflation climbs.

The core price index <MXCPIC=ECI>, which strips out some volatile food and energy prices, rose 4.32 percent in the 12-month period to mid-March.

The figure was above the 4.29 percent forecast in a Reuters poll.

In the first half of March, consumer prices rose 0.35 percent <MXCPIF=ECI> while the core price index <MXCPIH=ECI> climbed 0.31 percent.

(Reporting By Alexandra Alper and Miguel Angel Gutierrez; Editing by Bernadette Baum)

Crisis-hit Venezuela halts publication of another major indicator

FILE PHOTO: A man walks past empty shelves at a supermarket in Caracas, Venezuela March 9, 2017. REUTERS/Carlos Garcia Rawlins/File Photo

By Girish Gupta

CARACAS (Reuters) – Venezuela has stopped publishing money supply data, depriving the public of the best available tool to ascertain soaring inflation in one of the world’s worst-performing economies.

The country quit issuing inflation data more than a year ago, but annual consumer price rises are widely seen to be in triple digits, driven by an unraveling socialist system in which many people struggle to obtain meals and medicines.

A money supply indicator known as M2 was up by nearly 180 percent in mid-February from a year earlier, according to the central bank before it halted the release of the weekly data without explanation last month.

In contrast, neighboring Colombia’s M2 was up 7 percent in the same period and the United States’ was up 6 percent.

“If they are not publishing, you know it must be skyrocketing,” said Aurelio Concheso, director of the Caracas-based business consultancy Aspen Consulting.

The central bank and ministry of communications did not respond to a request for comment.

An increase in M2, the sum of cash together with checking, savings and other deposits, means more currency is circulating.

That can accelerate inflation when coupled with a decline in the output of goods and services – such as in Venezuela, which is in the fourth year of a recession.

The money supply indicator suddenly stopped appearing on the central bank’s website on Feb. 24.

The government ceased the dissemination of gross domestic product data more than a year ago. Before that, it put an end to the release of balance of payments figures and its consumer product scarcity index.

For a graphic on Venezuela’s money supply, click http://fingfx.thomsonreuters.com/gfx/rngs/VENEZUELA-ECONOMY/010040800HY/index.html

EXPONENTIAL RISE

Venezuela’s money supply, as measured by M2, has risen exponentially since Hugo Chavez, a leftist, came to power in 1999 and is a major factor behind what is thought to be the world’s highest inflation.

While M2 may seem an obscure technical indicator, the figure was routinely published in Venezuelan newspapers.

In the absence of official data — and highlighting Venezuela’s conflict of powers — the opposition-run National Assembly is publishing its own inflation figure, which it said reached 741 percent in the year to February.

Critics accuse the government of suppressing data in order to hide the magnitude of the economic mess and of stoking price rises by reckless money-printing and overspending.

Socialist Nicolas Maduro, elected president after Chavez’s 2013 death, has long blamed Venezuela’s difficulties on an “economic war” being waged on the government by the opposition and U.S. government.

With no money supply figures available, the closest alternative is “excess bank reserves” data. Still published by the central bank, it represents the total funds that banks have available to make commercial loans though is no substitute for M2, say economists.

The last year for which inflation data is available from the central bank is 2015, when consumer prices rose 181 percent.

(Additional reporting by Corina Pons; Editing by Brian Ellsworth and W Simon)

U.S. retail sales weakest in six months; inflation firming

Shoppers ride escalators at the Beverly Center mall in Los Angeles, California November 8, 2013. REUTERS/David McNew

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales recorded their smallest increase in six months in February as households cut back on motor vehicle purchases and discretionary spending, the latest indication that the economy lost further momentum in the first quarter.

Other data on Wednesday showed a steady increase in inflation, with the consumer price index posting its biggest year-on-year increase in nearly five years in February. Firming inflation could allow the Federal Reserve to raise interest rates on Wednesday despite signs of slowing domestic demand.

“Nothing here to suggest the Fed shouldn’t raise interest rates at the policy meeting that concludes later today,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

The Commerce Department said retail sales edged up 0.1 percent last month, the weakest reading since August. January’s retail sales were revised up to show a 0.6 percent rise instead of the previously reported 0.4 percent advance.

Sales were likely held back by delays in issuing tax refunds this year as part of efforts by the government to combat fraud. Compared to February last year retail sales were up 5.7 percent.

February’s retail sales gain was in line with economists’ expectations. Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.1 percent after an upwardly revised 0.8 percent jump in January.

These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported to have increased 0.4 percent in January.

In a separate report, the Labor Department said its Consumer Price Index ticked up 0.1 percent last month as a drop in gasoline prices offset increases in the cost of food and rental accommodation. That was the weakest reading in the CPI since July and followed a 0.6 percent jump in January.

In the 12 months through February, the CPI accelerated 2.7 percent, the biggest year-on-year gain since March 2012. The CPI rose 2.5 percent in the year to January. Inflation is firming in part as the 2015 drop, which was driven by lower oil prices, fades from the calculation.

The so-called core CPI, which strips out food and energy

costs, increased 0.2 percent last month as new motor vehicle prices fell and apparel prices moderated after spiking in January. The core CPI increased 0.3 percent in January.

In the 12 months through February, the core CPI increased

2.2 percent after advancing 2.3 percent in January. It was the 15th straight month the year-on-year core CPI remained in the 2.1 percent to 2.3 percent range.

The Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.7 percent.

ECONOMY SLOWING

The U.S. central bank is expected to raise its overnight benchmark interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent on Wednesday. It increased borrowing costs last December and has forecast three rate hikes in 2017.

U.S. financial markets were little moved by the data as traders awaited the outcome of the Fed’s meeting. The Fed will announce its decision on interest rates at 2 p.m. (1800 GMT)

February’s retail sales added to January’s weak reports on trade, construction and business spending that have pointed to sluggish economic growth in the first quarter.

The Atlanta Fed is forecasting GDP rising at a 1.2 percent annualized rate in the first quarter. With the labor market near full employment, slowing growth probably understates the health of the economy. In addition, GDP growth tends to be weaker in the first quarter because of calculation issues that the government has acknowledged and is working to resolve.

Tightening labor market conditions, which are steadily lifting wages, continue to underpin consumer spending.

In February, motor vehicle sales fell 0.2 percent after declining 1.3 percent the prior month. Receipts at service stations slipped 0.6 percent, reflecting lower gasoline prices.

Sales at electronics and appliances stores fell 2.8 percent, the biggest decline since December 2011, after climbing 1.1 percent in January. Receipts at building material stores increased 1.8 percent.

Sales at clothing stores fell 0.5 percent. Retailers including J.C. Penney Co Inc <JCP.N>, Abercrombie & Fitch <ANF.N> and Macy’s Inc <M.N> are scaling back on brick-and-mortar operations amid increased competition from online retailers, led by Amazon.com <AMZN.O>.

Sales at online retailers jumped 1.2 percent last month after increasing 0.5 percent in January. Receipts at restaurants and bars dipped 0.1 percent, while sales at sporting goods and hobby stores fell 0.4 percent.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. producer prices rise broadly in February

A combine drives over stalks of soft red winter wheat during the harvest on a farm in Dixon, Illinois, July 16, 2013. REUTERS/Jim Young

WASHINGTON (Reuters) – U.S. producer prices increased more than expected in February, and the year-on-year gain was the largest in nearly five years, pointing to a steady rise inflation pressures.

The Labor Department said on Tuesday that its producer price

index for final demand increased 0.3 percent last month after rising 0.6 percent in January. Economists polled by Reuters had forecast a 0.1 percent uptick.

In the 12 months through February, the PPI jumped 2.2 percent, the biggest advance since March 2012 and ahead of the 2.0 percent gain forecast in the Reuters poll. It followed a 1.6 percent increase in January.

Producer prices are rising as the prior weak readings, induced by cheap oil, drop out of the calculation. Crude oil prices have risen above $50 per barrel.

Also boosting price pressures are the dollar’s 1.5 percent drop against the currencies of the United States’ main trading partners since January and overall commodity price gains in tandem with a firming global economy.

A key gauge of underlying producer price pressures that excludes food, energy and trade services increased 0.3 percent in February, the biggest gain since April 2016. The so-called core PPI rose 0.2 percent in January.

Core PPI increased 1.8 percent in the 12 months through February after advancing 1.6 percent in January.

The Federal Reserve has a 2 percent inflation target and tracks a measure that is currently at 1.7 percent. Fed officials were due to start a two-day policy meeting later on Tuesday.

The U.S. central bank is expected to raise its overnight benchmark interest rate by 25 basis points to a range of 0.75 percent and 1.00 percent. It has projected three hikes in 2017.

In February, prices for final demand services increased 0.4

percent, accounting for more than 80 percent of the rise in the PPI. That was the biggest rise since June 2016 and followed a 0.3 percent gain in January.

The cost of energy products increased 0.7 percent last month, slowing from January’s 4.7 percent surge.

Wholesale food prices increased 0.3 percent after being unchanged in January. Healthcare costs rose 0.2 percent after a similar gain in January. Those costs feed into the Fed’s preferred inflation measure, the core personal consumption expenditures index.

The volatile trade services component, which measures changes in margins received by wholesalers and retailers, rose 0.4 percent last month after shooting up 0.9 percent in January.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Lisa Von Ahn)

Venezuela Congress begins measuring inflation amid cenbank silence

People queue to deposit their 100 bolivar notes, near Venezuela's Central Bank in Caracas, Venezuela December 16, 2016. REUTERS/Marco Bello

By Corina Pons and Brian Ellsworth

CARACAS (Reuters) – Venezuela’s opposition-led congress has started publishing the country’s inflation rate based on its own data collection, as the government of President Nicolas Maduro remains silent about the crisis-stricken nation’s soaring consumer prices.

The legislature has enlisted economics students to collect price data in five cities and asked former central bank employees to process it using the central bank’s methodology, said legislator Jose Guerra, an economist and former researcher at the bank.

Their measurements show prices rose 741 percent in the 12 months to February, 20.1 percent last month alone and 42.5 percent in the first two months of 2017.

Venezuela’s most recent official inflation figures, released last year, showed prices rising 180.9 percent in 2015.

“We’re not trying to substitute the central bank. We are filling the vacuum left by the central bank as a result of it not publishing the figures,” Guerra said in an interview.

The central bank did not immediately respond to an email seeking comment.

Venezuela’s economy has been in free fall since the 2014 collapse of oil prices, which left the socialist economic system unable to maintain an elaborate system of subsidies and price controls that functioned during the oil boom years.

Maduro says his government is the victim of an “economic war” led by political adversaries with the help of Washington.

The government has kept quiet about fundamental economic indicators including economic growth and balance of payments amid an increasingly dire panorama of swelling supermarket lines and worsening shortages.

The absence of inflation figures has everyone from workers to business owners unable to make basic economic calculations.

“Workers don’t know what their salary is, companies don’t know what their costs are,” Guerra said. “There’s no way to calculate the real interest rate. There’s no way to calculate the real exchange rate.”

He said the project already has drawn the interest of Wall Street banks, which are closely monitoring the country’s economy on concerns it could default on its high-yielding dollar bonds.

Measuring inflation is unusually complicated in Venezuela, because consumer products as well as hard currency fetch vastly different prices depending on whether or not they are distributed to the socialist economy’s subsidy system.

Consumers can sometimes obtain basic goods at low-cost prices by waiting for hours in supermarket lines but increasingly have to buy such goods from smugglers on informal markets for more than 10 times the officially mandated prices.

(Writing by Brian Ellsworth; Editing by Alexandra Ulmer and Bill Trott)

U.S. job growth rises briskly, wages continue to climb

People wait in line to enter the Nassau County Mega Job Fair at Nassau Veterans Memorial Coliseum in Uniondale, New York, U.S. October 7, 2014. REUTERS/Shannon Stapleton/File Photo

WASHINGTON (Reuters) – U.S. job growth increased more than expected in February and wages rose steadily, which could give the Federal Reserve the green light to raise interest rates next week despite slowing economic growth.

Nonfarm payrolls rose by 235,000 jobs last month as the construction sector recorded its largest gain in nearly 10 years due to unseasonably warm weather, the Labor Department said on Friday. The economy created 9,000 more jobs in December and January than previously reported.

Fed Chair Janet Yellen signaled last week that the U.S. central bank would likely hike rates at its March 14-15 policy meeting. Job gains averaged 209,000 per month over the past three months.

The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.

Last month’s brisk clip of hiring was accompanied by steady wage growth, with average hourly earnings rising 6 cents, or 0.2 percent.

January’s wage growth was revised up to 0.2 percent from the previous 0.1 percent gain.

That lifted the year-on-year increase in wages to 2.8 percent from 2.6 percent in January.

The unemployment rate fell one-tenth of a percentage point to 4.7 percent, even as more people entered the labor market, encouraged by the hiring spree. Economists polled by Reuters had forecast employment increasing by 190,000 jobs last month.

With the labor market near full employment, wage growth could speed up as companies are forced to raise compensation to retain employees and attract skilled workers.

According to economists, wage growth of between 3 percent and 3.5 percent is needed to lift inflation to the Fed’s 2 percent target. But inflation is already firming, in part as commodity prices rise.

Rising inflation, together with a tighter labor market, stock market boom and strengthening global economy, has left some economists expecting that the Fed could increase rates much faster than is currently anticipated by financial markets.

The U.S. central bank lifted its benchmark overnight rate in December and has forecast three rate increases for 2017.

Job growth has averaged more than 186,000 per month since January 2010, a recovery that predates Donald Trump’s presidency. While Trump’s victory last November sparked a stock market rally and jumps in consumer and business confidence, there has been no surge in either business or consumer spending.

Data ranging from trade to consumer and business spending suggest the economy slowed further early in the first quarter after growing at a 1.9 percent annualized rate in the final three months of 2016. The Atlanta Fed is forecasting gross

domestic product growing at a 1.2 percent rate this quarter.

All sectors of the economy, with the exception of retail and utilities, expanded payrolls in February. Manufacturing employment increased 28,000, the largest increase since August 2013, as rising oil prices fan demand for machinery.

Construction payrolls surged 58,000, the biggest gain since March 2007, boosted by warmer weather.

Retail sector employment fell 26,000 after a gain of 39,900 jobs in January. Retailers including J.C. Penney Co Inc <JCP.N> and Macy’s Inc <M.N> have announced thousands of layoffs as they shift toward online sales and scale back on brick-and-mortar operations.

Government payrolls increased by 8,000 jobs last month despite a freeze on the hiring of civilian federal government workers, which came into effect in January.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. consumer spending slows; inflation pushes higher

A shoppers carries bags with purchases through Quincy Market in downtown in Boston, Massachusetts, U.S. January 11, 2017. REUTERS/Brian Snyder

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer spending rose less than expected in January as the largest monthly increase in inflation in four years eroded households’ purchasing power, pointing to moderate economic growth in the first quarter.

The surge in inflation raises the possibility of an interest rate increase from the Federal Reserve this month. While still below the U.S. central bank’s 2 percent target, inflation is now in the upper end of the range that Fed officials in December felt would be reached this year.

The Commerce Department said on Wednesday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.2 percent after rising 0.5 percent in December. Economists polled by Reuters had forecast consumer spending gaining 0.3 percent in January.

Consumer spending is likely to remain supported amid promises by the Trump administration of sweeping tax cuts and increased infrastructure spending.

In a speech to Congress on Tuesday night, President Donald Trump said his economic team was working on a “historic tax reform that will reduce the tax rate on our companies” and promised a “massive” tax relief for the middle class. Trump offered no further details.

Consumer confidence has surged following Trump’s election victory, hitting a 15-1/2-year high in February.

In January the personal consumption expenditures (PCE) price index increased 0.4 percent – the largest gain since February 2013 – after rising 0.2 percent in December.

In the 12 months through January, the PCE price index jumped 1.9 percent. That was the biggest year-on-year gain since October 2012 and followed a 1.6 percent increase in December.

Excluding food and energy, the so-called core PCE price index rose 0.3 percent in January. That was the biggest increase since January 2012 and followed a 0.1 percent gain in December.

The core PCE price index increased 1.7 percent year-on-year after a similar gain in December. The core PCE is the Fed’s preferred inflation measure.

Prices for U.S. Treasuries fell, with the yield on the interest-rate sensitive 2-year note <US2YT=RR> rising to its highest level since August 2009. Fed funds futures were pricing in a 65 percent chance of an interest rate hike at the Fed’s March 14-15 policy meeting.

The U.S. central bank has forecast three rate increases this year. The Fed hiked its overnight interest rate last December by 25 basis points to a range of 0.50 percent to 0.75 percent.

The dollar rose against a basket of currencies, while U.S. stock index futures pared gains slightly.

REAL SPENDING FALLS

Rising price pressures, however, suggest that consumer spending will probably not provide a big boost to gross domestic product in the first quarter. When adjusted for inflation, consumer spending fell 0.3 percent in January, the first drop since August and the biggest in three years. Real consumer spending increased 0.3 percent in December.

Consumer spending increased at a 3.0 percent annualized rate in the fourth quarter, helping to blunt some of the impact on the economy from a wider trade deficit. The economy grew at a 1.9 percent rate in the fourth quarter.

Consumer spending in January was held back by a 0.3 percent drop in purchases of long-lasting manufactured goods such as automobiles. Spending on services was unchanged.

Personal income rose 0.4 percent in January after gaining 0.3 percent in December. Wages and salaries rose 0.4 percent.

Income at the disposal of households after accounting for inflation and taxes, fell 0.2 percent, the first decline since October 2013. Savings increased to $795.7 billion in January from $779.5 billion in December

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Brazil set to keep aggressive pace of rate cuts to salvage economy

A view of Brazil's Central Bank in Brasilia, Brazil, September 15, 2016. Picture taken September 15, 2016. REUTERS/Adriano Machado

By Alonso Soto

BRASILIA (Reuters) – Brazil’s central bank will likely maintain its aggressive pace of interest rate cuts on Wednesday despite some calls to further step up monetary easing to rescue an economy mired in recession.

The bank’s 9-member monetary policy committee, known as Copom, will likely cut its benchmark Selic rate <BRCBMP=ECI> by 75 basis points to 12.25 percent, according to all but one of the 54 economist surveyed by Reuters last week.

Unions and business groups have demanded a cut of 100 basis points to reduce some of the world’s highest borrowing costs, which they say could undermine a still feeble recovery.

A rapid drop in inflation, which could end the year below the 4.5 percent official target, has strengthened the case for a bolder rate cut after the bank surprised markets by cutting more than expected at its last meeting.

The recent appreciation of the real currency <BRBY> has analysts betting on more aggressive rate cuts ahead.

“We think there is a growing case for a bolder cut of 100 basis points– if not now, then at the next policy meeting,” economists with BNP Paribas wrote in a note to clients.

Central bank chief Ilan Goldfajn has signaled policymakers would maintain the current pace of rate cuts, but that future monetary easing would hinge on the approval of austerity reforms to ease inflationary pressures.

Brazil’s recession, the worst in its history, has left millions unemployed and bankrupted hundreds of companies, raising pressure on Goldfajn to lower rates.

Facing a grueling fiscal crisis President Michel Temer is relying on falling interest rates to exit a recession that threatens to stretch into a third year.

However, the sharp drop in inflation has sparked a debate inside his administration over whether the government’s 2019 inflation target, decided in June, should be set at a lower level. That could slow the pace of monetary easing.

Brazil introduced an inflation rate target in 1999. The current 4.5 percent goal was first adopted for 2005, originally with a tolerance margin of plus or minus 2.5 percentage points. In 2015, the government narrowed the range to plus or minus 1.5 percentage points.

(Reporting by Alonso Soto; Editing by Andrew Hay)