Brazil inflation slows to 0.26% in May, below market forecasts

The result came in well below the median forecast of 0.34% from 30 financial institutions and consultancies surveyed by Valor Data, Valor’s financial data provider. It also undershot the lowest estimate in the range, which spanned from 0.29% to 0.43%.

Over the 12 months through May, the Broad Consumer Price Index (IPCA) rose 5.32%, compared with 5.53% in the 12 months through April. Market expectations compiled by Valor Data had pointed to a 5.40% increase, with projections ranging from 5.35% to 5.51%.

Despite the slowdown, the 12-month inflation rate remains above the upper limit of the target range set by the National Monetary Council (CMN) and pursued by Brazil’s Central Bank. The inflation target for 2025 is 3%, with a tolerance margin of 1.5 percentage points in either direction.

Among the nine expenditure groups that make up the IPCA, five posted slower increases from April to May: food and beverages (from 0.82% to 0.17%), apparel (from 1.02% to 0.41%), health and personal care (from 1.18% to 0.54%), personal expenses (from 0.54% to 0.35%) and communication (from 0.69% to 0.07%).

Household goods shifted into deflation, with prices falling 0.27% after rising 0.53% in April. Housing costs accelerated from 0.14% to 1.19%. Education maintained a steady pace at 0.05%, while transportation continued in deflationary territory, moving from -0.38% to -0.37%.

The Brazilian statistics agency calculates the IPCA based on the consumption patterns of households earning between one and 40 times the minimum wage, covering 10 metropolitan regions as well as the cities of Goiânia, Campo Grande, Rio Branco, São Luís, Aracaju, and Brasília.

Less widespread increases

Inflation was less widespread in May, with the diffusion index—which measures the share of goods and services that recorded price increases—falling to 59.7%, from 66.8% in April, according to Valor Data. Excluding food, a particularly volatile component, the index dropped to 59.8% from 64.1%.

Core inflation