Inflation accumulated in 12 months in Brazil continued to fall in May and reached 3.94% – informed the Brazilian Institute of Geography and Statistics (IBGE) this Wednesday (7).
Official inflation in May was 0.23%, below the 0.61% recorded in April, according to the IBGE’s Extended Consumer Price Index (IPCA). In the same month of 2022, retail prices had increased by 0.47%. It is the lowest accumulated in 12 months since October 2020, when it stood at 3.92%.
The data released this Wednesday show that price increases have fallen again for the 11th consecutive month, a scenario that led President Luiz Inácio Lula da Silva to pressure the Central Bank (BCB) to reduce the Selic reference interest rate, today among the highest in the world (13.75%).
The deceleration in May was stimulated by the result of food products and beverages, the category with the greatest weight in the index, whose variation was 0.16%, compared to 0.71% registered in April.
The transport sector, in turn, stood out for the fall (-0.57%), as a result of the reduction in airfares and fossil fuels.
The biggest increase occurred in health and personal care (0.93%), driven by the increase in health plans.
The official data was below the market forecast, which forecast a rise of 0.37% for the fifth month of the year, according to the Focus survey by the Central Bank released this week.
Meanwhile, the expectation for this year stood at 5.69%, below the previous weeks, but still above the ceiling of the BCB’s target (4.75%).
The inflation rate is in the sights of the monetary authority, which keeps the rates high to align these projections with its objectives.
– Reviews –
The Lula government reinforced the criticism of the reference rate, which makes credit more expensive for companies and families, and hinders growth.
“There is no explanation for why we have the highest interest rate in the world, at 13.75%. Why such high interest? Who gains from this?”, questioned Lula on Tuesday, during an event in Pernambuco.
The president of the BCB, Roberto Campos Neto, defended this week that the high interest rates can be explained because “the government owes a lot (money). If you owed less, the interest would be lower”.
Gustavo Sung, chief economist at investment firm Suno Research, said the “significant cooling” of inflation shown on Wednesday “may positively help the Central Bank” to cut the Selic rate.
He assessed, however, that the cut could start in August, and not at the next meeting this month of the Monetary Policy Committee of the BCB.
The BCB “will only start the process of interest rate cuts when it is certain that inflation is on a stable path and towards the target, anchored expectations – it has already been showing signs of cooling down – and without major shocks that would make it change midway route,” explained Sung.
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