Wells Fargo Economics projects Brazil’s April IPCA inflation to rise 0.9% month-over-month and around 4.5% year-over-year, near or above the target band. Energy and food pressures are intensifying, while inflation expectations have risen. The Brazilian Central Bank is still seen cutting rates cautiously in June, but a pause in the easing cycle is becoming more likely.

Energy and food drive inflation risks

“We expect Brazil’s April IPCA to rise a sharp 0.9% month-over-month, pushing headline inflation to around or slightly above the top of the target band at 4.5% year-over-year.”

“Energy remains the key near‑term upside risk, with the Middle East conflict lingering and physical supply constraints becoming more binding, driving stronger pass‑through into refined products.”

“Food inflation was already firming in March, and higher transport and fertilizer costs should broaden price pressures across food categories in coming months.”

“While core inflation remains restrained by restrictive real rates, administrative price smoothing and fiscal offsets, particularly in an election year, are adding upside risks to inflation expectations.”

“Against this backdrop, we think the BCB is likely to proceed with a cautious cut at the June meeting, but the outlook beyond that has become increasingly uncertain, with a pause in the easing cycle looking more likely.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)