(Bloomberg) — Brazil’s annual inflation rate rose less than expected in June as the central bank paused its cycle of interest rate cuts to combat simmering price pressures.
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Official data released Wednesday showed prices increased 4.23% from a year earlier, below the 4.32% median estimate from analysts in a Bloomberg survey. Inflation hit 0.21% on the month.
Policymakers broke a nearly yearlong streak of rate cuts last month as the economy outperforms expectations and investors fret over President Luiz Inacio Lula da Silva’s spending plans. The decision likely keeps the benchmark Selic in double-digits for the foreseeable future, a bid to tamp down fears that inflation could remain persistent.
Price rises are far their below their post-pandemic peak in 2022, but are now being pushed up by higher food costs and a slide in Brazil’s currency, the real. Economists have raised their inflation forecasts further above the 3% target.
The cautious monetary policy has enraged Lula. He says borrowing costs are choking off growth and that central bank chief Roberto Campos Neto is inflicting too much economic pain in trying to reach the inflation goal.
The clash has shaken local assets with markets betting the leftist president will try to exert more political pressure on the central bank once Campos Neto’s term ends later this year.
–With assistance from Giovanna Serafim.
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