SAO PAULO, June 7 Reuters Consumer prices in Brazil decelerated more than expected in May, government data showed on Wednesday, with 12month inflation hitting its lowest in more than two years as it dropped below the 4 mark for the first time since late 2020.

The figures look to add weight to calls by the government and business people for the central bank to lower interest rates from their current sixyear high of 13.75.

Annual inflation in Latin America39;s largest economy hit 3.94 in May, statistics agency IBGE said, below the median forecast of 4.04 in a Reuters poll of economists, reaching its lowest since October 2020.

Markets responded well, with the benchmark stock index Bovespa gaining 1, trading above 115,000 points for the first time since November 2022, while interest rate futures dropped sharply. The real strengthened 0.1 against the dollar.

Brazil39;s Planning Minister said in a statement the lowerthanexpected figures prove that a disinflationary process is underway in the country, even with unfavorable base effects expected to trigger an inflation uptick starting July.

Pantheon Macroeconomics economist Andres Abadia highlighted in a note to clients that with inflation dropping overall, leading indicators are pointing to a benign outlook in the near term, opening the door for rate cuts as soon as Q3.

Brazil39;s central bank has kept its benchmark rate at 13.75 since September to control inflation, attracting criticism from President Luiz Inacio Lula da…