BRASILIA: Brazil's 12-month inflation rate probably edged up in mid-May after the government allowed medicine prices to rise, reinforcing expectations that the new central bank chief will not rush to cut interest rates from near 10-year highs.
Consumer prices likely rose 9.50 percent in the 12 months through mid-May, up from an increase of 9.34 percent in mid-April, according to the median of 19 forecasts in a Reuters poll for the IPCA-15 index due on Friday.
The official inflation target is 4.5 percent. Economists expect prices to fall towards that goal later this year as a deep recession curbs consumption, but the expected inflation drop is unlikely to be fast enough to allow room for interest rate cuts at the next central bank policy meeting in June.
On a monthly comparison, prices probably rose 0.75 percent in mid-May from mid-April, up from an increase of 0.51 percent in the prior month, the poll showed.
The government allowed medicine prices to rise up to 12.5 percent, the biggest increase in 10 years, after the currency weakened sharply and made imports more expensive.
Cigarette prices also probably helped fuel inflation after a tax increase, according to the chief economist of SulAmerica, Newton Rosa.
"Measurements of inflation remain under pressure and above the target, which puts limits on a faster decline in interest rates from the current 14.25 percent," wrote Rosa in a report.
Ilan Goldfajn, chief economist of Itau Unibanco Holding SA , will replace Alexandre Tombini as central bank governor in the interim administration of President Michel Temer.
In his last remarks before the appointment, Goldfajn said inflation was set to decline, which could make room for rate cuts in the second half of 2016.
Forecasts for the monthly inflation rate in the poll ranged from 0.42 percent to 0.80 percent.
Estimates for the 12-month rate were between 9.15 and 9.56 percent.
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