Inflation in Brazil falls to 3,94% in 12 months

Official inflation in May was 0,23%, below the 0,61% recorded in April, according to the IBGE's Broad 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 was 3,92%.

Data released this Wednesday show that price increases fell 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 slowdown in May was stimulated by the result of food and beverages, the category with the greatest weight in the index, whose variation was 0,16%, compared to 0,71% recorded in April.

The transport sector, in turn, stood out for its drop (-0,57%), as a result of the reduction in air tickets 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 predicted an increase of 0,37% for the fifth month of the year, according to the Central Bank's Focus survey released this week.

Meanwhile, expectations for this year stood at 5,69%, below previous weeks, but still above the BCB target ceiling (4,75%).

The inflation rate is in the sights of the monetary authority, which keeps rates high to align these projections with its objectives.

Critics

The Lula government reinforced criticism of the reference rate, which makes credit more expensive for companies and families and hinders growth.

“There is no explanation why we have the highest interest rate in the world, at 13,75%. Why such high interest? Who benefits from this?” questionor Lula on Tuesday, during an event in Pernambuco.

The president of the BCB, Roberto Campos Neto, argued this week that the high interest rates are explained because “the government owes a lot (money). If you owed less, the interest would be lower.”

Gustavo Sung, chief economist at the investment company Suno Research, said the “significant cooling” in inflation shown on Wednesday “could 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 BCB's Monetary Policy Committee.

The BCB “will only begin the process of interest rate cuts when it is certain that inflation is on a stable path and towards the target, with anchored expectations – it is already showing signs of cooling down – and without major shocks that would cause it to change. route in the middle of the way”, explained Sung.

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