Economy 2 MIN READ

UPDATE 2-Brazil’s inflation hits highest for April in 26 years, +12.1% in 12 months

May 11, 2022By Reuters

Adds comments from economists

By Marcela Ayres

Brazil’s inflation slowed in April but still posted the steepest rise for the month in 26 years, pushing the 12-month figure to over 12% amid continued pressures on food and fuel, official figures showed on Wednesday.

Consumer prices as measured by the benchmark IPCA index rose 1.06% in April, slightly above the 1.0% increase forecast by economists in a Reuters poll, but lower than the 1.62% increase seen in March.

According to the statistics agency IBGE, the monthly result was again driven by the rise in food and beverages (+2.06%), and transport (+1.91%), groups that have been impacted by skyrocketing commodities and disrupted supply chains in the wake of the Russia-Ukraine war.

Eight of the nine groups surveyed showed increases in April, reinforcing the spread of inflation in Latin America’s largest economy. Only expenditures with housing fell (-1.14%) due to cheaper energy tariffs.

In the 12 months through April, prices were up 12.13%, against 12.07% expected in the poll, and higher than the 11.3% print seen through March.

That is even further from this year’s official target of 3.5%.

Deteriorating inflation has made economists worsen their outlooks not only for 2022, but also for next year, which led the central bank to signal a likely interest hike in June, after already raising rates to 12.75% from a 2% record low in March 2021. nL2N2X20U6

The latest figures point to a broad-based increase in price pressures, said William Jackson, Chief Emerging Markets Economist at Capital Economics, who expects additional 75 basis points of hikes over the coming months, to 13.5%.

Felipe Oliveira, an economist at MAG Investimentos, said that inflation should slow down due to cheaper electricity and a lower increase in food prices from June, the harvest season.

But he pointed out that gasoline is about 20% below international prices, with possible adjustments helping to keep inflation high, “although below the rates observed in recent months”.

(Reporting by Marcela Ayres; Editing by Angus MacSwan)

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