Inflation is falling, but gasoline still weighs heavily on the index.
Current IPCA inflation would already allow for a drop in interest rates in Brazil.
SAO PAULO (Reuters) - The rise in food and housing prices showed some relief, and the increase in the IPCA-15 (Brazilian consumer price index) slowed more than expected in April, bringing the 12-month index below 5% for the first time in just over two years, although gasoline continues to exert strong pressure.
Brazil's National Consumer Price Index-15 (IPCA-15) rose 0,57% in April, after increasing 0,69% in March, the Brazilian Institute of Geography and Statistics (IBGE) reported on Wednesday.
As a result, the index considered a preview of official inflation, measured by the IPCA, accumulated a rise of 4,16% over the 12 months to April, up from 5,36% in March, the first time it has fallen below 5% since February 2021.
The inflation target for this year is 3,25%, with a margin of 1,5 percentage points above or below, as measured by the IPCA.
The results were slightly below expectations in a Reuters poll, which predicted increases of 0,61% for the month and 4,20% over 12 months.
In April, the slowdown in the IPCA-15 was due to less intense price increases in Food and beverages (from 0,20% in March to 0,04% in April), Communication (from 0,75% to 0,06%) and Housing (from 0,81% to 0,48%).
Food consumed at home registered a 0,15% drop in prices, with notable decreases in potatoes (-7,31%), onions (-5,64%), soybean oil (-4,75%), and meats (-1,34%).
On the other hand, Transportation showed the largest increase in costs, at 1,44%, and the greatest impact on the month's index, although it slowed slightly from 1,50% in March.
This result was due to a 3,47% increase in gasoline prices and a 1,10% increase in ethanol prices. Airfares also jumped 11,96% in April, after a 5,32% decrease in the previous month.
The Central Bank will decide on monetary policy again next week, with widespread market expectations that the benchmark Selic interest rate will remain at 13,75%, amid renewed criticism of the government.
Analysts believe that inflation in Brazil should gradually slow down, in a scenario of restrictive monetary policy and weak economic activity, but regain some strength in the second half of the year.
The most recent Focus survey conducted by the Central Bank with the market shows that the expectation is that the IPCA (Brazilian consumer price index) will end this year with an accumulated increase of 6,04%, going to 4,18% in 2024.