FILE PHOTO: A drone view shows the Ver-o-Peso market in Belem, Para state, Brazil, February 6, 2025. REUTERS/Adriano Machado/File Photo

By Gabriel Burin

(Reuters) -Brazil's inflation probably stayed high in July but with some deceleration in underlying trends, a Reuters poll of economists suggested.

Policymakers are waiting for a cooling in consumer prices to launch a series of interest rate cuts to boost economic activity before next year's presidential election.

Monthly inflation likely sped up to 0.37% in July from 0.24% in June, according to the median estimate of 23 economists polled August 6-11 ahead of the release of official data on Tuesday.

The increase came from a hike in energy bills that more than offset a second consecutive month of deflation in food and beverages, already reflected in biweekly figures.

Costs of beef, rice and other staples fell slightly in July, partly due to product seasonality after a persistent rise in previous months, the biweekly data showed.

On the year, inflation is seen edging down to 5.33% in July against 5.35% in the previous month, still above the central bank's target of 3.0% with a tolerance margin of 1.5 percentage points.

However, some core measures probably showed hints of improvement at a time when data are closely monitored to identify the effect of the central bank's strict monetary policy.

"Underlying services should remain at high levels, but with a marginal deceleration - easing to 6.0% - for the 3 month moving average - from 6.3% in June," Itau Unibanco analysts wrote in a report.

More indications may come from the so-called inflation "run rate", or its annualized rate calculated from monthly data, J.P. Morgan analysts wrote in a report.

"If we are correct, the inflation run rate over the last three months has returned to within the target range for the first time in over a year," the report said.

Headline inflation is set to slow to 4.6% on average in the first quarter of 2026, according to a separate Reuters poll, enabling the start of an interest rate easing cycle from the current two-decade high of 15%.

Last month, the central bank halted a string of rate hikes to consider their impact on the economy amid increasing uncertainty due to U.S. tariffs.

Policymakers expect consumer prices to decelerate more by the end of 2025 in line with a moderation of economic growth.

The appreciation of Brazil's real this year should also contribute by increasing domestic supply of tradable goods that become more expensive in terms of foreign currency.

(Reporting and polling by Gabriel Burin; Editing by Andrew Heavens)