Brazil's annual inflation rate drifts further above target in April

SAO PAULO, May 9 (Reuters) - Brazil's annual inflation rate rose to 5.53% in April from 5.48% in the prior month, official data showed on Friday, days after the central bank hiked its benchmark interest rate to the highest level in almost 20 years due to stubbornly high inflation.

Consumer prices in Latin America's largest economy remain well above the Brazilian central bank's inflation target of 3% with a tolerance of plus or minus 1.5 percentage points.

Monthly inflation as measured by the IPCA index rose 0.43%, decelerating from the 0.56% growth registered in March.

Finance Minister Fernando Haddad said the reading came in line with expectations, adding he is confident that inflation will close the year "a little better" than projections.

On Monday, private economists surveyed by the Brazilian central bank lowered their expectations for the country's inflation rate in 2025 to 5.53%, well above the 4.8% estimate unveiled by the central bank this week.

The food and beverages category as well as the health and personal care group were the main contributors to the monthly rise, according to IBGE.

Brazil's central bank monetary policy committee, known as Copom, on Wednesday hiked its Selic benchmark interest rate by 50 basis points to 14.75%, the highest level since 2006.

Policymakers left future steps open amid global uncertainties, stressing that the current environment calls for a "significantly contractionary monetary policy for a prolonged period" to bring inflation to target.

Andre Valerio, a senior economist at Inter, said the IPCA reading for April should not impact the direction of monetary policy, given the central bank's latest decision, which paves the way for steady rates going forward.

"The next few months should see an easing in inflation, as restrictive monetary policy begins to impact the labor market, relieving services inflation, and the recent appreciation of the currency begins to show up in industrial and free items inflation," he said in a statement.