The inflation has been on the rise since January when the government initiated a number of austerity measures and tax increases aiming at balancing overall budget. The new taxes have raised the prices of basics like electricity, bus fares and gasoline. The government has been trying to fight inflation by increasing the borrowing cost. In fact, since September of 2014, the Selic overnight lending rate was raised by 275 basis points to 13.75 percent.
On a month-on-month basis, consumer prices edged up 0.74 percent, following a 0.71 percent increase in April. Electricity cost accounted for most of the rise (up 2.77 percent) though there were big differences among regions. For example in Recife electricity prices rose by 12.2 percent, in Salvador by 12.07 percent, in São Paulo by 1.87 percent and in Rio de Janeiro by 1.21 percent. Additional upward pressure came from cost of food and beverages which rose 1.37 percent and health and personal care (up 1.1 percent). In contrast, transport prices fell 0.29 percent.