Brazil's monthly inflation likely eased below 1pc in April

BRASILIA: Brazil's monthly inflation rate probably eased in April to the lowest in five months, laying the groundwork for the central bank to stop raising interest rates soon, a Reuters poll showed.

Consumer prices as measured by the benchmark IPCA index probably rose 0.76 percent in April from March, the lowest rate since November, according to the median of 34 forecasts that ranged from 0.70 to 0.93 percent.

The expected inflation relief should be partly explained by the fading impact of recent increases in electricity rates, economists said. Government-regulated prices have been rising sharply since late last year as part of government efforts to raise cash and plug a growing budget deficit.

The 12-month inflation rate probably remained far above the 4.5 percent official target, at 8.22 percent, according to the median of 26 estimates in the poll. That would be the highest rate since December 2003, surpassing the 8.13 percent increase seen in March.

Still, the likely slowdown in monthly price increases would be the first concrete sign that Brazil's stubbornly high inflation is set to subside in coming months after a long series of rate hikes by the central bank.

The Brazilian central bank raised its benchmark interest rate to a six-year high of 13.25 percent last week, from a record low of 7.25 two years ago, aiming at lowering the inflation rate to 4.5 percent by end-2016. The bank raised rates even as the economy appeared set to fall into recession.

Economists are divided on whether the central bank will keep rates at 13.25 percent through the rest of the year or raise rates one last time in June, to 13.50 percent. However, nearly all watchers see the current cycle of rate hikes close to an end.

"While inflation will remain well above the upper bound of its target range for the rest of this year, we suspect that it has been the pace of the recent acceleration in inflation that has alarmed policymakers most and, on this front, the big increases are now behind us," said Neil Shearing, chief emerging markets economist at Capital Economics, in London.

Brazil's statistics agency IBGE will publish the April inflation report on Friday at 9 a.m. (1200 GMT).