Rate Hikes Fail To Tame Brazil’S Inflation Fueled By Food And Energy

(MENAFN- The Rio Times) Brazil's official statistics agency, IBGE, reported that consumer prices rose 0.43% in April 2025, pushing annual inflation to 5.53%. This figure stands above the Central Bank's target ceiling of 4.5%, set under the new continuous regime introduced in January.

The monthly increase slowed from March's 0.56%, but the yearly rate marks the highest since early 2023. Food and health expenses drove most of the inflation. Food and beverages prices jumped 1.14% in April, with notable increases in tomatoes, coffee, and milk.

Health and personal care costs rose 0.96%, reflecting higher prices for medicines and personal hygiene products. Together, these two groups accounted for 88% of the month's overall inflation.

Eight of nine surveyed product groups posted price increases, with only transportation showing a decline, mainly due to a sharp drop in airfares and lower fuel prices.

Regionally, nine out of eleven surveyed areas registered price increases. Porto Alegre saw the highest rise at 0.88%, largely due to surging tomato and gasoline prices. Goiânia posted the only decline, driven by cheaper ethanol and gasoline.



The persistent inflation has forced the Central Bank 's Monetary Policy Committee to act. On May 7, the committee raised the benchmark Selic interest rate by half a percentage point, bringing it to 14.75%, the highest since 2006.

This marks the sixth consecutive rate hike, underscoring the bank's concerns about inflationary pressures. The committee signaled that future rate moves will depend on economic data, highlighting ongoing uncertainty.

Analysts note that, despite the rate hikes , inflation remains stubborn due to food and energy costs. The Central Bank recently lowered its inflation forecast for 2025 to 4.8%, but this still exceeds the official target.

The government has introduced stimulus measures, but the inflationary environment complicates efforts to support growth without fueling further price rises.

Business leaders and investors watch these developments closely. High interest rates increase borrowing costs and may slow investment, while persistent inflation erodes consumer purchasing power.

The Central Bank's next policy meeting in June will be critical for setting the tone of Brazil's economic management in the face of continued inflationary risks.

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