Brazil’s annual inflation slowed further in early June, reaching its lowest level in nearly three years.
The Brazilian central bank has indicated that it may start cutting interest rates at its next meeting if consumer prices stay tame.
inflation in Latin America’s largest economy reached 3.4% in mid-June, slightly above market expectations of 3.36% but slowing from 4.07% in May and the lowest since September 2020, According to data from the IBGE statistics agency.
Analysts expect major Latin American central banks, which have led some of the toughest tightening operations over the past two years, to lead the world in cutting interest rates.
Andres Abadia of Pantheon Macroeconomics said that inflation in Brazil “continued to decline rapidly during the second quarter and inflation expectations are now under control,” noting that this would allow the central bank to “cut interest rates soon.”
Earlier, the Central Bank of Brazil confirmed that the majority of the Monetary Policy Committee believes that a rate cut in August is possible if inflation continues to decline.
Annual inflation is now within this year’s higher target range of 3.25%-4.75%, although a pick-up is expected from July due to headwinds.
The bank’s pessimistic stance came after it decided last week to keep benchmark interest rates at a six-year high of 13.75% for the seventh consecutive meeting.
The move angered government officials, who see it as hindering economic growth.
