Brazil’s May Consumer Prices Rose at Slowest Monthly Pace Since September

Brazil’s monthly inflation decelerated to its slowest pace since September on lower fuel and transport costs.

Brazil consumer prices rose 0.47 percent in May from April, the government’s statistics agency said in a report distributed in Rio de Janeiro today. Annual inflation through May accelerated to 6.55 percent, the fastest pace since July 2005, the agency said.

Economists surveyed by Bloomberg expected inflation to slow to 0.47 percent in May from 0.77 percent in April, according to the median forecast of 39 analysts.

The yield on the interest rate futures contract maturing in January 2012, the most traded on the Sao Paulo exchange, rose one basis point, or 0.01 percentage point, to 12.38 percent at 8:05 a.m. New York time. The real rose 0.4 percent to 1.5773 per dollar.

Consumer prices rose 6.51 percent in the year through April, breaching the upper limit of the target range for the first time since 2005. The central bank targets inflation of 4.5 percent, plus or minus two percentage points.

Latin America’s biggest economy gained speed in the first quarter, challenging President Dilma Rousseff’s efforts to cool growth and bring inflation to the target by next year.
Growth Rate

Gross domestic product expanded 1.3 percent in the first quarter from the previous three-month period and 4.2 percent from a year earlier, the national statistics agency said June 3. Growth in the fourth quarter of 2010 from the previous three months was revised to 0.8 percent from 0.7 percent.

Unemployment fell in April to the lowest level on record for the month, keeping pressure on policy makers trying to cool demand fueled by full-employment conditions.

Brazil’s government is trying to prevent overheating by increasing borrowing costs, reducing spending and limiting credit growth.

Policy makers increased the benchmark rate by a quarter- point to 12 percent in April, after raising it half a percentage point in each of their previous two meetings. Traders are betting the central bank will raise borrowing costs a further 0.25 percentage point this week, according to Bloomberg estimates based on interest rate futures.
Signs of Slowing

Brazil’s expansion has shown some signs of slowing since it grew by 7.5 percent last year. Industrial production slumped 2.1 percent in April from March, the biggest contraction since 2008, and consumer confidence fell in May to its lowest level in more than a year. Average real wages fell 1.8 percent in April from March.

Finance Minister Guido Mantega said growth will slow in the second quarter, when measures taken to slow the economy will have their biggest impact.

The economy is growing at a more “moderate” pace than it was last year, Mantega said June 3.

Economists surveyed by the central bank held their forecast for 2011 economic growth at 4 percent on June 6, and cut their 2012 growth forecast to 4.1 percent from 4.2 percent a week earlier.