By Gabriel Burin
(Reuters) -Brazil’s monthly inflation is expected to have slowed for the fourth time in a row in June due in part to lower gasoline prices, a Reuters poll showed.
However, the 12-month measure likely remained high, justifying the central bank’s strategy to keep interest rates elevated, analysts said. The official data are expected to be released on Thursday.
The IPCA consumer price index is forecast to have risen 0.20% in June after a 0.26% increase in May, according to the median estimate of 19 economists polled July 2-7.
But on a year-on-year basis, inflation was likely unchanged at 5.32% from may, still well above the government’s target of 3% plus or minus a margin of 1.5 percentage points for the ninth consecutive month.
“We expect projected monthly drops in food at home of -0.43% and in gasoline of -0.60% will be more than offset by a projected increase in electricity of 3.63%,” said Mirella Hirakawa, research coordinator at Buysidebrazil.
State-run oil firm Petrobras cut gasoline prices to distributors last month, the first such reduction since October 2023.
The decision came shortly after international oil prices fell to their lowest in more than four years in May. Crude futures picked up again in June amid tensions in the Middle East but Petrobras held off from hiking its prices.
Still, electricity costs in Brazil jumped last month as the government applied temporary surcharges related to diminished hydroelectric energy generation caused by low water levels at reservoirs.
“We don’t expect June data to bring much relief to the central bank’s concerns… 12-month cumulative inflation would only show more consistent signs of convergence to target in the fourth quarter,” Hirakawa said.
The governor of Banco Central do Brasil (BCB) reiterated this week his view that the country needs restrictive interest rates to meet inflation targets.
Brazil’s finance minister said this should happen at some point next year, potentially alleviating a problem that has hurt President Luiz Inacio Lula da Silva’s popularity.
In the latest weekly BCB poll among economists, consensus estimates for inflation at the end of 2025 and next year were 5.18% and 4.50%, respectively.
But the projection for 2026 was still far from the main 3% objective many analysts consider more relevant.
(Reporting and polling by Gabriel Burin; Editing by Kim Coghill)
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