Brazil inflation rate falls in May as economy weakens

Brazil’s inflation rate fell in May to the lowest level this year, official data showed Friday, increasing pressure on the central bank to slash interest rates to kick-start Latin America’s biggest economy. Consumer price growth stood at 0.13 per cent last month, compared with 0.57pc in April, the statistics agency said. It was the lowest level for the month of May since 2006 and below the 0.20pc reportedly expected by analysts.

The biggest weight on the index was a 0.56pc drop in food and beverage prices. The central bank has been resisting pressure to cut its main interest rate, already at a historic low of 6.5pc and unchanged since March 2018, for fear of fanning inflation as President Jair Bolsonaro’s government struggles to push its economic reform agenda through Congress.

Adjusting the key Selic rate is seen as one of the few tools Brazil has to revive growth as it totters on the edge of recession for the first time in two years. Recent data showed gross domestic product contracted 0.2 percent in the first quarter from the previous threemonth period.

The figure confirmed what many Brazilians already knew -- two years on from a devastating 2015-2016 recession, Brazil’s economy is still struggling. The outlook is bleak. Market analysts have pared back their full-year growth forecasts for 14 weeks in a row and now expect the economy to grow 1.13pc.