Brazil's annual inflation YoY for April is 3.69 percent, above the expectation

Brazil’s annual inflation rate:

Brazil’s annual inflation rate continued to fall, but somewhat less than predicted in April, according to official data released on Friday, in the first consumer price readings since the country’s central bank chose to slow the pace of interest rate cuts.

IBGE, the statistics office, said that inflation in Latin America’s largest economy was 3.69% in the year ending April. While this constituted a decrease from the previous month’s 3.93%, it was slightly higher than the 3.66% projected by Reuters economists.

Earlier this week, Brazil’s central bank announced a 25 basis-point cut in interest rates, bringing them to 10.5%. This move indicated a slowdown in the continuing easing cycle, which had previously seen six successive 50-basis-point drops. The decision, which was not unanimous, caused a drop in stocks and the real currency, raising concerns about the potential impact of political pressure on monetary policy.

Annual inflation remains within the bank’s target range of 3% plus or minus 1.5 percentage points, but recent global worries have bolstered interest rate futures and the US currency, prompting the central bank to be more cautious.

Headline inflation continues to fall, and the near-term picture is bleak, but the dollar’s recovery since February will begin to increase inflationary pressures in the coming months,” Pantheon Macroeconomics economist Andres Abadia stated.

“As such, we continue to expect the headline rate to end the year at around 3.5%.”

Consumer prices grew 0.38% in April from March, according to IBGE, up from 0.16% the previous month and slightly beating experts’ 0.35% prediction in a Reuters poll.

Seven of the nine groups examined by the statistics agency experienced price increases in April. Healthcare, food, and beverage price hikes stood out, although economists saw a decline in closely watched services inflation as a positive sign.

“Despite the higher-than-expected reading, we still see a benign process with no clear signs of inflation resuming,” Inter’s chief economist, Rafaela Vitoria, said.

“We believe the monetary easing cycle will continue with additional 25-basis-point cuts, bringing the benchmark rate to 9.25% at the end of 2024.”