Brazil's 12-month inflation rate slowed less than expected in April as the government allowed medicine prices to rise, adding to signs that the central bank could wait longer before cutting interest rates to counter a deep recession. Consumer prices as measured by the benchmark IPCA index rose 9.28 percent in the 12 months through April, down from an increase of 9.39 percent in the previous month but above forecasts for a 9.20 percent rate in a Reuters poll. Prices rose 0.61 percent in April from March, up from an increase of 0.43 percent in the previous month, government statistics agency IBGE said.
Yields on interest rate futures rose after the data as traders saw a smaller likelihood of interest rate cuts by the central bank at its next meeting in June. The central bank targets annual inflation at 4.5 percent, a goal last achieved in August 2010. In minutes published on Thursday, it said it would not lower interest rates from nearly 10-year highs until inflation expectations fall to the target. Brazil's inflation rate has eased off 12-year highs as a deep recession entered its second year. Economists in a weekly central bank poll forecast the benchmark Selic rate could be lowered to 13.25 percent by year-end, from 14.25 percent currently.
Prices of medicines rose 6 percent in April from March, offsetting a decline in electricity rates. In keeping with their recent upward trend, food prices rose more than 1 percent. "We suspect food inflation is now close to peaking, but this component of the index basket is notoriously difficult to forecast," wrote Neil Shearing, chief emerging markets economist with Capital Economics. On a 12-month basis, the increase in services prices slowed for another month to 7.36 percent from 7.51 percent in March, according to Banco Fator calculations.
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