Brazilian prices probably dropped in June for first time in 11 years

A woman looks for vegetables outside a bus called Sacolao in Santa Teresa neighborhood in Rio de Janeiro

BRASILIA (Reuters) – Brazil’s monthly inflation rate probably turned negative in June for the first time in 11 years, leaving the door open for another deep interest rate cut by the central bank this month, a Reuters poll showed on Tuesday.

Consumer prices as measured by the benchmark IPCA index likely fell 0.17 percent in June, according to the median of 22 estimates that ranged between a drop of 0.26 percent and an increase of 0.13 percent. <BRCPI=ECI>

The annual inflation rate probably slowed to 3.06 percent from 3.60 percent in May, according to the median of 21 estimates that ranged between 2.96 and 3.37 percent.

Statistics agency IBGE will publish the June inflation rate on Friday at 9 a.m. local time (1200 GMT).

Inflation has plunged from nearly 11 percent in early 2016, leaving the central bank comfortable to cut interest rates by 400 basis points since October in a bid to help the economy emerge from a two-year-long recession.

The bank signaled last month that rising market uncertainty in the wake of a scandal implicating President Michel Temer would probably prompt the central bank to slow down the pace of interest rate cuts. However, with inflation falling more than expected, an increasing number of traders and economists have placed bets on another 100 basis-point cut at the bank’s next meeting on July 26. <BCBWATCH>

Lower fuel and electricity prices were the likely causes of last month’s expected deflation rate, according to economists at Banco Bradesco SA <BBDC4.SA>.

The government targets inflation at 4.5 percent for this year and next, 4.25 percent for 2019 and 4.00 percent for 2020. The lower targets for the years ahead were the first reduction in the official goal in more than a decade.

(Reporting by Silvio Cascione; Editing by Matthew Lewis)