Monthly Inflation in Brazil Slows

SAO PAULO (Reuters) – Brazil’s monthly inflation slowed for the fourth consecutive month in June, but the annual rate increased, remaining above the official goal. Data released on Thursday prompted the central bank to issue a letter justifying the failure to meet the inflation target.

Consumer prices, measured by the benchmark IPCA index, rose by 0.24% in June, according to the government statistics agency IBGE. This was a decrease from the 0.26% increase reported in May but above the 0.20% rise anticipated by economists surveyed by Reuters.

Over the 12 months leading to June, prices increased by 5.35%, exceeding the 5.32% recorded in May, while economists had predicted a rate of 5.32% for June.

Brazil’s central bank has set an inflation target of 3%, with a tolerance interval of plus or minus 1.5 percentage points, which has been surpassed for the ninth consecutive month.

Central bank governor Gabriel Galipolo issued an open letter to the monetary council later that day to explain the missed target, as required by Brazilian regulations. Galipolo reaffirmed the bank’s commitment to reducing the inflation rate after recently raising interest rates to 15%, the highest since July 2006, and indicated that rates would be held steady for an extended period.

In his letter, Galipolo stated that the central bank anticipates that the accumulated inflation rate over 12 months will return to the tolerance interval by the end of the first quarter of 2026.

Kimberley Sperrfechter, an economist at Capital Economics, noted that there’s little in the June CPI data that suggests a change in the view that last month’s increase marked the conclusion of the Copom tightening cycle. However, she emphasized that future developments would depend significantly on the trade dispute with the U.S. and fluctuations in the Brazilian real.