Brazil witnessed an increase in consumer price inflation in May, following a seven-month period of easing. This rise has kept inflation above the central bank's target of 3 percent, indicating that policymakers are likely to maintain the Selic rate at its current level in the forthcoming week.
Data from the Brazilian Institute of Geography and Statistics (IBGE) revealed that the consumer price index (CPI) rose by 3.93 percent year-over-year in May, compared to a 3.69 percent increase in April. This figure slightly surpassed economists' expectations, who had predicted a rise to 3.89 percent.
Despite the acceleration, inflation remained within the central bank's upper tolerance threshold of 4.50 percent.
Notably, the prices of food and beverages saw an accelerated annual growth rate of 3.56 percent in May, up from 3.1 percent in April. Additionally, transportation costs also contributed to the inflationary pressure, rising by 4.32 percent in May compared to 3.27 percent in the previous month.
On a month-to-month basis, consumer prices edged up by 0.46 percent in May, following a 0.38 percent increase in April. The anticipated rise was 0.42 percent, with the primary contributors being developments in food and beverage prices.
Capital Economics' economist William Jackson commented that the current inflation trajectory and a marked re-acceleration in core services inflation make a rate cut improbable next week.
"Given that inflation is projected to increase further, the labor market remains robust, and inflation expectations are on the rise, it is now likely that the Selic rate will stay at 10.50 percent until the end of the year," Jackson stated.
