Brazil’s annual inflation continued to fall but slightly less than expected in April, official data showed Friday, in the first readings of consumer prices after the country’s central bank voted to reduce the pace of its cuts interest rate.
Inflation in Latin America’s largest economy reached 3.69% in the 12 months to April, statistics agency IBGE said, representing a slowdown from 3.93% in the previous month. , but a little more than the 3.66% expected by economists polled by Reuters.
Earlier this week, Brazil’s central bank cut rates by 25 basis points to 10.5%, slowing its ongoing easing cycle after six consecutive 50 basis point cuts. The split decision sent stocks and the real currency tumbling after minority votes for a deeper cut raised fears that monetary policy could take a dovish turn under pressure from politicians.
Annual inflation remains within the bank’s target range of 3% plus or minus 1.5 percentage points, but recent global uncertainties supporting interest rate futures and the US dollar have been cited as reasons for the greater caution of the central bank.
“Headline inflation continues to fall and the near-term outlook is benign, but the dollar’s rebound since February will start to fuel inflationary pressures in the months ahead,” said Andres Abadia, economist at Pantheon Macroeconomics.
“We therefore continue to believe that the overall inflation rate will end the year at around 3.5%.
Consumer prices in April increased by 0.38% compared to March, according to the IBGE, which represents an acceleration from 0.16% in the previous month and slightly exceeds the 0.35% forecast by the economists in a Reuters poll.
Seven of the nine groups studied by the statistics agency saw their prices increase in April. Rising costs for health care, food and beverage stood out, while economists pointed to the decline in closely watched services inflation as a positive.
“Despite a higher-than-expected reading, we still see a benign process and no clear signs of inflation re-accelerating,” said Rafaela Vitoria, Inter’s chief economist.
“We believe the monetary easing cycle will continue with further cuts of 25 basis points, bringing the benchmark rate to 9.25% at the end of 2024.”
