One-year inflation in Brazil continued to slow in May for the 11th consecutive month, to 3.94%, according to official data published on Wednesday, enough to fuel the pressure of the Lula government on the central bank (BCB) so that it lowers its key rate.
The left-wing president Luiz Inacio Lula da Silva continues to criticize the BCB’s monetary policy, which maintains its key rate at 13.75%, the highest in the world, hampering, in his view, economic recovery and the return to employment.
The 12-month inflation in Latin America’s largest economy is the lowest since October 2020. It rose to 4.18% in April, when the monthly price increase was 0.61%.
This increase was much less significant in May, 0.23%, according to figures from the IBGE statistics institute. Analysts consulted by the Central Bank’s weekly Focus survey were expecting monthly inflation of 0.37%.
Small increase in food prices
This is due in particular to a slight increase in food prices (+0.16%, against +0.71% in April).
And the cost of transport even fell last month (-0.57%), thanks in particular to a drop in the price of plane tickets and fuel.
The Focus survey’s forecasts for inflation in 2023 have been revised downwards, to 5.69%, a figure however higher than the target set by the BCB (3.25%, with a margin of plus or minus 1. 5 points).
On Tuesday, Lula reiterated his criticisms of the level of the key rate, which has been kept unchanged by the Central Bank since August. It is inexplicable that we have the highest rate in the world. what good? Who benefits from it? he wondered during an official ceremony in his native state of Pernambuco (north-east).
The president of the BCB, Roberto Campos Neto, with whom Lula has engaged in a standoff since the start of his third presidential term in January, this week justified the maintenance of the key rate at 13.75% by the government’s high indebtedness.
Gustavo Sung, chief economist at the investment firm Suno research, believes, however, that the significant decline in inflation in May could help convince the central bank to reduce its rate.
But according to him, this reduction could take place only in August, and not at the time of the next meeting of the monetary committee of the BCB, envisaged in two weeks.