SAO PAULO (Reuters) – Annual inflation in Brazil continued to slow down in early June, hitting its lowest in nearly three years as the central bank signaled it may start cutting interest rates as soon as August if the positive scenario for consumer prices consolidates.
In Latin America’s largest economy, 12-month inflation reached 3.40% in mid-June, data from statistics agency IBGE showed on Tuesday, slightly above market expectations of 3.36% but still the lowest since September 2020.
The latest figure, showing a deceleration from 4.07% in May, comes as the local central bank said that a majority of its monetary policy committee sees a rate cut in August as possible if the ongoing disinflation process continues.
The stance followed the bank’s decision to keep its benchmark interest rate at a six-year high of 13.75% for a seventh consecutive meeting last week, a move that upset government officials who see it as hindering economic growth.
President Luiz Inacio Lula da Silva, who on Tuesday renewed his criticism of central bank Governor Roberto Campos Neto, said it was “irrational” for the institution to hold rates at that level while 12-month inflation runs at around 4%.
Brazil’s IPCA-15 consumer price index, IBGE data showed, rose 0.04% in the month to mid-June, down from 0.51% in the previous month. The index had been expected to fall 0.01%, according to the median forecast in a Reuters poll.
The monthly data was driven by a drop in food and transportation costs in the month, the agency said, which ended up offset by a jump in housing prices and personal expenses.
(Reporting by Gabriel Araujo; Editing by Steven Grattan)
