Brazil annual inflation rises to 4.9pc in April, highest in over two years

BRASILIA: Annual consumer price inflation in Brazil rose to 4.9% in April, government statistics agency IBGE said on Friday, the highest in over two years and further above the central bank's end-year target of 4.25%.

It is the highest since January 2017, but policymakers may draw comfort from the fact that it didn't hit 5.00%, as was predicted in a Reuters poll of economists. The monthly rate of inflation eased and was also slower than expected.

Consumer prices were 0.57% higher in April from March, IBGE said, but below forecasts of 0.63% and down from 0.75% the month before. But accumulated inflation in the first four months of the year was 2.09%, the highest for this period since 2016.

Policymakers are likely to welcome the slowdown in month-on-month inflation, a trend that could continue, given the lack of price pressures coming from the stagnant economy. On the other hand, that may not be the case if the currency, the real, stays as weak as it has been for most of this year.

"The data continue to show signs that the weak exchange rate is fueling inflation," said Isabela Guarino, chief economist at XP Asset Management in Sao Paulo, adding that annual inflation should still head lower in the months ahead.

Alberto Ramos, head of Latin American economic research at Goldman Sachs in New York, said the central bank will leave its benchmark Selic rate at 6.50% "in the near future," assuming no further deterioration in the exchange rate.

The central bank this week left the Selic unchanged at its record low level where it has been for over a year, opting to look past the current strength in inflation to highlight the general and broad-based weakness of the economy.

Policymakers have said they think inflation will peak around April or May and then drift back toward their 4.25% target by the end of the year.

Consumer prices were driven up in April by food and drink rising 0.63% on the month, transport climbing 0.94% and health and personal care goods increasing 1.51%, IBGE said. The only sector to register deflation was household goods, down 0.24%.

Among the notable increases, perfumes jumped 6.56% in April from March, airline tickets rose 5.32% and gasoline was up 2.66%, on average.