Brazil: Inflation increases in May for first time in eight months
Inflation inched up to 3.9% in May, above April’s 3.7%. The acceleration was roughly in line with market expectations, and broke a seven-month streak of cooling price pressures. Looking at the details of the release, the pick-up was broad-based, with greater price pressures recorded for transportation, food and beverages, as well as housing and utilities.
Meanwhile, the trend was unchanged, with annual average inflation remaining at April’s 4.3% in May. Meanwhile, core inflation was also steady, coming in at April’s 3.8% in May.
Finally, consumer prices increased a seasonally adjusted 0.46% over the previous month in May, picking up from the 0.38% rise recorded in April.
Our Consensus is for the disinflation process to stall and inflation to stabilize close to current levels in what remains of 2024, at a level below 2023’s average. As such, inflation will remain within the Central Bank of Brazil’s 1.5–4.5% tolerance band but above the midpoint through the end of our forecast horizon in 2028. Extreme weather events, stronger-than-anticipated wage growth and a weaker-than-expected real are upside risks.