• The annual inflation rate has dropped to 11.73 percent.
• The monthly rate came in at 0.47 percent, down sharply from April.
• The annual rate remains well above the central bank’s target of 3.5 percent.

Brazil’s inflation rate fell in May, according to the government, providing some relief to hard-hit consumers, though rising prices continue to weigh on Latin America’s largest economy.

According to the national statistics institute, the annual inflation rate has dropped to 11.73 percent, a 0.4 percentage point decrease from April.

The monthly rate came in at 0.47 percent, down sharply from April, when it was 1.06 percent, a 26-year high for the month.

However, the annual rate remains well above the central bank’s target of 3.5 percent.

Brazil’s central bank has gone on one of the most aggressive monetary tightening cycles in the world in a bid to bring down inflation, raising the key interest rate 10 straight times since March 2021 to a five-year high of 12.75 percent.

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“The fall in Brazilian inflation in May suggests that Copom (the central bank’s monetary policy committee) will continue to slow the pace of tightening with a 50-basis-point rate hike” when it meets next week, said Nikhil Sanghani, Latin America economist at consulting firm Capital Economics.

“But with inflation set to stay in the double-digit territory in the coming months, we doubt that this would mark the end of the tightening cycle,” he said in a note.

Soaring food prices, in particular, have harmed Brazilian households and weighed on the economy.

That has emerged as a major liability for far-right President Jair Bolsonaro as he prepares to run for reelection in October, trailing leftist ex-president Luiz Inacio Lula da Silva in the polls.

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