Fresh economic data shows that Brazil’s inflation cooled more than anticipated in the first half of April, providing the central bank with more breathing room as it prepares for its next interest rate decision.
Key details from the report include:
- Lower-than-Expected Rise: The IPCA-15 index, which serves as a mid-month proxy for official inflation, rose by 0.89% in the month to mid-April. This was below the 1.0% increase predicted by economists in a Reuters poll.
- Annual Figures: On a yearly basis, inflation reached 4.37%. While this is an increase from the previous month’s 3.90%, it came in significantly lower than the market forecast of 4.49%.
- Driving Factors: The monthly price growth was primarily fueled by rising costs in transportation and food, largely due to a spike in global fuel prices linked to Middle East tensions.
- Rate Decision Outlook: Despite the monthly uptick, the “undershoot” compared to forecasts has reinforced market expectations that the central bank will move forward with a 25-basis-point cut to the benchmark interest rate (bringing it to 14.50%) during its meeting this Wednesday.
Economists suggest that the easing of underlying price pressures, combined with high real interest rates, gives policymakers the necessary justification to continue their current easing cycle.