The May IPCA surprised to the downside and reinforces the assessment that the peak of Brazilian inflation in 12 months must have been left behind, assesses the Bank of America (BofA). Faced with signs of relief from the pace of price increases, the trend is for the Central Bank (BC) to see room to end the cycle of interest rate hikes in June, with the Selic at 13.25%.
“The result was consistent with our view that inflation has already peaked and we expect further deceleration ahead,” writes BofA’s Head of Economics for Brazil and Strategy for Latin America at BofA, David Beker, in a report. “All things considered, the positive result gives more reasons for the BC not to lengthen the tightening cycle, supporting our view of a last 0.5 point high in June, bringing the Selic to 13.25%.”
The IPCA decelerated from 1.06% in April to 0.47% in May, 0.13 percentage points below the survey median Broadcast projections, of 0.60%. Ahead, BofA’s preliminary estimates suggest inflation of 0.43% in June and 0.52% in July, consistent with a 12-month trajectory of rate cooling.
Source: CNN Brasil
