Brazil: Inflation remains at over two-year high in April
Latest reading: Inflation was stable at March’s 5.5% in April, in line with market expectations. April’s result represented the joint-highest inflation rate since February 2023, and marked the seventh month in a row of inflation topping the Central Bank (BCB)’s 1.5–4.5% tolerance band. Looking at the details of the release, faster increases in prices for food plus housing and utilities offset lower price pressures for transport.
Still, the trend pointed up, with annual average inflation ticking up to 4.7% in April (March: 4.6%). Meanwhile, core inflation rose to 5.1% in April from the previous month’s 4.9%.
Lastly, consumer prices increased 0.43% over the previous month in April, coming in below the 0.56% rise seen in March. April’s result marked the weakest reading since January.
Outlook: Our Consensus is for inflation to remain around current levels in May–June and to inch up in Q3, before embarking on a downward trajectory from Q4 onwards. Our panelists see it averaging above the Central Bank’s tolerance band until Q3 2026, when the impact of the tightening cycle will have started to trickle down to the real economy.
Overall in 2025, our Consensus is for average inflation to top both last year’s level and the Central Bank’s tolerance range. Despite a notably wider interest rate differential against the U.S. Fed, the Brazilian real will average weaker vs the USD this year compared to last, spurring imported inflation. This, coupled with a robust labor market and continued wage growth, will exert upward pressure on inflation. Extreme weather impacting electricity and food prices is an upside risk, while the impact of the government’s fiscal policy on domestic demand is a factor to watch.