Brazil's inflation accelerates in May, tops target range ahead of rate decision

By Fernando Cardoso and Camila ‌Moreira

SAO PAULO, June ​12 (Reuters) - ​Brazil's consumer inflation accelerated more than expected in May, official data showed on Friday, breaching the top of the central bank's target range ‌for the first time since October ahead of a key rate ⁠decision next week.

Annual inflation in Latin America's largest economy rose to 4.72% in May, statistics agency ‌IBGE said, up from 4.39% ‌in April and above the 4.66% consensus forecast by economists in a Reuters poll.

On a monthly basis, consumer prices rose 0.58%, easing from 0.67% in April. ​Economists had expected a 0.53% rise.

The data comes ahead of the central bank's June 16 to 17 policy meeting. It targets inflation at 3%, plus ⁠or minus 1.5 percentage points.

Policymakers in April cut the benchmark Selic rate by 25 basis points for a second ​straight meeting, to 14.50%, but left their next move open, citing emerging inflation risks as the U.S.-Israeli war with Iran drags ​on.

The increase in May inflation was mainly driven ‌by food and beverages, which rose 1.33% from the month before. Transport costs fell 0.46%, though, after jumping in March due ⁠to the oil price shock linked to the Middle East conflict.

RATE CUTS IN CHECK

Central bank Governor Gabriel Galipolo warned last week that demand-driven pressures are adding to inflation, pointing to ⁠indicators that strip out supply shocks, such as those linked to the Iran conflict.

The remarks came ​as Brazilian banks have been trimming expectations for further rate cuts, citing a tougher inflation outlook driven by higher oil prices and domestic fiscal stimulus.

A weekly central bank survey showed economists ‌increasingly expect a shallower easing cycle. The latest poll sees the Selic rate at 13.50% by year-end, up from 13.25% ‌a week earlier.

"The report does not change the overall picture that inflation remains under pressure," ⁠Rafael Rondinelli, an economist at ‌MAG Investimentos, said.

"The data underscores ​the need for caution in assessing the next steps in monetary policy."

(Reporting by Fernando Cardoso and Camila Moreira; Editing by Mark Potter, ‌Elaine Hardcastle)

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