Brazil’s inflation falls for the 10th consecutive month amid high rates

Brazil’s annual inflation slowed for the tenth consecutive month in mid-March, although underlying readings remained elevated as the central bank resists mounting political pressure to lower interest rates.

Consumer prices rose 5.36% from a year earlier, down from last month’s reading of 5.63% but slightly above the median estimate of analysts surveyed by Bloomberg of 5.33%.

Monthly inflation slowed to 0.69%, according to official data released Friday.

Monetary policymakers kept the benchmark rate at 13.75% this week for the fifth consecutive meeting, angering President Luiz Inácio Lula da Silva and his economic team.

While the inflation outlook worsens, the leftist leader is clamoring for lower interest rates to boost economic growth.

The head of the central bank, Roberto Campos Neto, “must take care of monetary policy, but he must also take care of employment, inflation, and people’s incomes,” Lula told reporters Thursday. “Everyone knows it is not doing that.”

The central bank, whose autonomy is protected by legislation passed in 2021, has largely ignored the demands.

In a statement issued after its decision, the bank alluded to deteriorating inflation expectations and warned of additional increases if necessary to reach the target.

Despite the recent slowdown in headline inflation, many analysts said Friday’s reading would reaffirm the bank’s hawkish stance.

“Underlying price pressures remain very strong,” William Jackson, chief emerging markets economist at Capital Economics, wrote in a research report.

Policymakers “will delay monetary easing until later this year, with the first interest rate cuts due in the final quarter.”

Eight of the nine groups of goods and services monitored by the statistics agency became more expensive in mid-March.

Transportation costs rose by 1.5% and accounted for almost half of the month’s inflation – gasoline up 5.76% and ethanol up 1.96% – following the expiration of fuel tax exemptions. Meanwhile, the price of household goods fell by 0.18%.

Annual inflation in Latin America’s largest economy has plunged from last year’s peak of more than 12% but remains above the bank’s 2023 and 2024 targets of 3.25% and 3%, respectively.

Lula’s clash with the monetary authority worries hawkish investors and budget makers, who say Brazil’s mounting debts leave little room for additional spending.

With information from Bloomberg in linea

More: Brazil news in English, every day from The Rio Times.