PREVIEW-Brazilian consumer prices likely slowed down in April

Brazilian consumer price inflation likely slowed in April, giving fresh ammunition to government officials demanding immediate monetary policy easing from a reluctant central bank, a Reuters poll showed. Inflation in annual terms has dropped markedly from more than 12% a year ago to just above 4%, following an aggressive cycle of interest rate hikes.

Brazilian consumer price inflation likely slowed in April, giving fresh ammunition to government officials demanding immediate monetary policy easing from a reluctant central bank, a Reuters poll showed.

Inflation in annual terms has dropped markedly from more than 12% a year ago to just above 4%, following an aggressive cycle of interest rate hikes. However, monthly measurements as well as end-of-year forecasts remain over target. The IPCA inflation index to be released on Friday at 0900 am (1200 GMT) probably cooled to a 0.54% monthly rate from 0.71% in March, while the 12-month reading fell to 4.10% versus 4.65%, according to median estimates of 22 economists polled May 3-9.

In a new swipe at Banco Central do Brasil (BCB), a key figure in the economic team this week reiterated President Luiz Inacio Lula da Silva´s call for rate cuts to bolster growth, after the bank kept them unchanged for the sixth straight time. BCB policymakers are concerned about high inflation expectations, which have slightly deteriorated even after the government presented a fiscal plan to calm investor worries over Brazil's debt burden.

Despite seeing lower inflation rates of 0.57% on the month and 4.10% annually in April, Citi analysts said in a report they still viewed higher vegetable prices countering more moderate trends in meats and oils. "Services prices should also impose upward pressure to the headline. Looking ahead, we continue expecting IPCA inflation to continue dropping, reaching the low in June 2023 (3.7% year-on-year)."

But consensus forecasts in the central bank's weekly surveys of economist views keep pointing to around 6.0% inflation at the end of 2023. If materialized, this would breach the official goal of 3.25% with a margin of 1.5 percentage points. "We expect headline inflation to pick up in the second half of 2023 due to wage increases and additional public spending, with CPI closing the year at 5.2% y/y," Oxford Economics analysts wrote in a report.

Attention is now focused on a meeting next month of a special panel that sets Brazil's annual targets for consumer pries, which the country missed in 2021 and 2022. The committee is formed by two government ministers and the BCB's governor. While Lula has advocated raising inflation goals to clear the way for less restrictive policy, Finance Minister Fernando Haddad seemed to water down the idea, saying recently he backed a longer-term view.