June 06, 2014, 08:47:00 AM EDT
SAO PAULO–Brazilian monthly consumer prices slowed in May versus the previous month, but not as much as expected, as the impact of one of the worst droughts in decades in food prices receded only partially.
Brazil’s consumer-price index, the IPCA, rose 0.46% compared with a 0.67% climb in April, the Brazilian Geographic and Statistics Institute, or IBGE, said Friday.
The monthly inflation index came above analysts average forecast for a rise of 0.38% in May, according to a Wall Street Journal survey of 14 economists. The May monthly inflation was the lowest level since September last year, when it increased 0.35%.
Still, annual inflation pushed higher. The rolling 12-month index picked up through May, rising 6.37% versus 6.28% recorded through April, the IBGE said.
A lower monthly inflation reading may provide some support to the central bank’s decision to halt its year-long cycle of interest-rate increases. At the end of May, the central bank left its benchmark Selic rate on hold at 11%. To justify the move, the central bank said it expects weaker economic growth this year, and the full impact of the rate increases haven’t yet been felt.
The slowdown in May inflation came as food prices, which carry the greatest weighting in the index, showed some signs of easing back from the recent spike. Prices picked up by just 0.58%, compared with 1.19% in April, according to IBGE.
In the past several months, food prices have increased rapidly as the country’s worst drought in decades pushed up prices of fruits and vegetables, economists said. While the drought is still ongoing, the adjustment that shopkeepers have made in previous months means the impact on prices is now receding.