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Annual inflation in Brazil slowed to its lowest level since October 2020

Annual inflation in Brazil slowed to its lowest level since October 2020

Brazil’s inflation for the first half of May was 0.44% and the interannual rate was 3.70%. Analysts expected a greater impact from the floods that affected agricultural production in the south of the country.

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Inflation in the first half of May in Brazil was below what analysts expected and the year-on-year rate slowed slightly to 3.70%, the lowest level since October 2020, as reported by the IBGE statistics agency. The market anticipated a greater impact from the floods in the south of the country.

According to official data, prices rose by 0.44% in the first days of the month, which represents a rebound compared to the 0.21% in April, although the market expected an increase closer to 0.5%. Food and beverage prices rose 0.26%, down from the previous month’s 0.61% increase.

In this way, the figures keep Brazil’s inflation rate within the its central bank’s target, which currently stands at 3%, plus or minus 1.5 percentage points.

This is the first data after the floods in the state of Rio Grande do Sul, which killed almost 170 people and affected food production in the agricultural state, one of the main producers of meat and cereals.

“In a scenario in which the market is concerned about whether or not the monetary authority will continue its rate cut cycle, this reading of the IPCA-15 shows that so far the effects of Rio Grande do Sul are not pressing inflation,” said Jefferson Laatus, chief strategist at brokerage Grupo LAATUS.

For her part, Helena Veronese, chief economist at B.Sides Investimentos, said the mid-May inflation data had a “benign composition” and was cadherents with another 25 basis point cut in interest rates at the next central bank meeting, in June.

He warned, however, that the full extent of the floods’ impact on inflation is still uncertain, with additional pressures expected to come from commodities such as rice and wheat.

Monetary policymakers have pledged to work to return inflation to the 3% target and have expressed concern about inflation expectations above that level for this year and next.

Source: Ambito

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