Brazil’s consumer prices rose 0.62% in the first half of May compared to the previous month, surpassing analyst expectations of 0.57%, according to official data released Wednesday. Annual inflation reached 4.64%, breaching the central bank’s target ceiling of 4.5%.
The acceleration was driven by increases in food and housing prices. The central bank’s target is 3%, with a tolerance range of 1.5 percentage points above or below.
President Luiz Inácio Lula da Silva has introduced social aid measures ahead of the October reelection bid to counter economic pressures from the Iran war’s energy shock. These programs have supported household budgets and economic activity despite the benchmark Selic interest rate standing at 14.5%.
The central bank has been gradually reducing the Selic rate, but persistent price pressures and economic resilience have raised questions about the scope for additional cuts. A strong jobs market and government stimulus have sustained consumer spending.
Inflation forecasts for December have climbed for 11 consecutive weeks, with economists now projecting the rate will reach 5.04% by year-end, according to the central bank’s weekly survey.