June 10, 2020 / 12:51 PM / a month ago

UPDATE 1-Brazil posts steepest monthly deflation since 1998 as COVID-19 slams transport costs

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By Jamie McGeever

BRASILIA, June 10 (Reuters) - Inflation in Brazil continued to evaporate in May, official figures showed on Wednesday, as falling fuel and air travel costs due to the coronavirus crisis led to the steepest monthly fall in consumer prices since August, 1998.

Consumer prices as measured by the IPCA index fell 0.38% in May, less than the 0.46% fall economists in a Reuters poll had expected but still the fastest monthly rate of deflation in almost 22 years.

The annual rate of inflation slowed to 1.9% in May from 2.4% in April, slightly above the Reuters poll forecast of 1.8%, but also the lowest annual rate of inflation since January 1999, according to Refinitiv data.

The annual rate of inflation is well below the central bank's official 2020 target of 4.0%, even allowing for the 1.5 percentage point margin allowed on either side of that figure.

The latest batch of soft inflation data could give the central bank the green light to cut interest rates when it meets next week.

According to IBGE, the biggest deflation drivers in May were a 4.35% decline in gasoline prices and 27.1% slump in air tickets on the month, both of which dragged overall transport costs down by 1.9%.

Of the nine sectors covered, six showed deflation in May and three recorded prices rises, IBGE said. (Reporting by Jamie McGeever; Editing by Andrew Heavens and Chizu Nomiyama)

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