Brazil's May inflation rate fell to 0.26% month-over-month, below market expectations of 0.32% and down from 0.43% in April, while the yearly rate decelerated to 5.32% from 5.53%. Core inflation measures also improved, with the average of five core measures tracked by Brazil’s central bank slowing to 0.30% month-over-month. The diffusion index, tracking the percentage of items recording price increases, declined to 59.7%, the first time below 60% since November 2024, suggesting a broad easing of inflationary pressures.
Brazil's May inflation data indicates a significant deceleration in price pressures, surpassing market expectations and signaling a broad-based easing. The month-over-month inflation rate fell to 0.26%, down from 0.43% in April and below the 0.32% consensus estimate as well as Bank of America's 0.30% forecast. Year-over-year inflation also moderated to 5.32% from 5.53%. Crucially, core inflation measures demonstrated notable improvement: the average of five core measures tracked by Brazil’s central bank slowed to 0.30% month-over-month from 0.50% in April, while core services inflation decreased to 0.42% from 0.61%. The inflation momentum, represented by the three-month moving average at a seasonally adjusted annual rate, also declined to 5.48% from 5.71%. Furthermore, the diffusion index, which measures the proportion of items with price increases, dropped to 59.7% from 66.8%, its first reading below 60% since November 2024, underscoring the widespread nature of the disinflationary trend.
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