Brazil: Inflation accelerates further in July
Inflation accelerated for a third month running in July, coming in at 4.5% following June’s 4.2%. July’s figure was the highest inflation rate since February and overshot market analysts’ expectations. Looking at the details of the release, the pickup was largely due to rising price pressures for transportation. In addition, price pressures for housing and utilities grew at a faster pace.
Nonetheless, the trend was stable, with annual average inflation coming in at June’s 4.4% in July. Meanwhile, core inflation rose to 4.2% in July from the previous month’s 3.7%.
Lastly, consumer prices rose a seasonally adjusted 0.38% in July over the previous month, accelerating from June’s 0.21% increase.
Our panelists see inflation slowing from current levels over the rest of Q3 and further in Q4, while remaining within the Central Bank of Brazil’s (BCB) 1.5–4.5% tolerance range. Extreme weather events, a weaker-than-projected real and higher-than-anticipated food costs pose upside risks to the outlook. Moreover, Petrobras’ 7.0% gasoline price hike in July is an additional upside risk.
Overall in 2024, inflation will average below 2023’s level and within the BCB’s range. That said, it will remain above the 3.0% midpoint of the target through our forecast horizon, which ends in 2028.