According to the latest data released by Brazil’s statistics agency IBGE, Brazil’s annual inflation rate fell slightly less than anticipated in April, reaching 3.69%, compared to 3.93% in the previous month. This figure was marginally above the expectation of economists polled by Reuters, who predicted a rate of 3.66%.
The decrease in inflation follows the Central Bank of Brazil’s decision, announced earlier in the week, to lower interest rates by 25 basis points to 10.5%, marking a slowdown in the ongoing easing cycle following six consecutive reductions of 50 basis points. However, this decision sparked some controversy, as minority votes in favour of larger cuts led to declines in both stocks and the Brazilian real currency.
Central Bank officials have expressed concern regarding the impact of recent global uncertainties, including rising interest rate futures and strengthening of the US dollar, on inflation. As a result, they are taking a more cautious approach. “Headline inflation continues to decline, and the short-term outlook is promising, but the appreciation of the US dollar since February will likely lead to inflationary pressures in the coming months,” remarked Pantheon Macroeconomics economist Andres Abadia.
Inflation in Brazil’s key segments, such as healthcare, food, and beverages, all experienced price hikes during April. Economists pointed out a decrease in service inflation as a positive sign. Rafaela Vitoria, chief economist at Inter, stated that “despite the higher-than-expected reading, we still see a benign process and no apparent indications of inflation acceleration”. Inter predicts that the easing cycle will continue with further 25-basis-point reductions, bringing the benchmark rate to 9.25% by the end of 2024.
(Source: Reuters)
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