Brazil: Inflation rises in March
Latest reading: Consumer prices rose 4.1% in annual terms in March, following a 3.8% rise in the previous month, moving closer to the upper bound of the Central Bank’s 1.5–4.5% tolerance band.
Relative to the previous month’s data, there were higher price pressures for transportation (+3.7% in annual terms vs +2.5% in February) and food and beverages (+2.1% vs +1.8% in February). In contrast, there were milder price pressures for clothing (+4.9% vs +5.0% in February) and education (+6.4% vs +6.5% in February). Finally, the change in housing and utilities prices was the same as in the prior month (+5.7% in March and February).
Meanwhile, core consumer prices were up 4.7% in annual terms in March, following a 4.9% increase in the prior month.
Finally, consumer prices rose 0.88% in March on a month-on-month basis, following a 0.70% increase in the prior month.
Both the month-on-month and year-on-year accelerations in March were much sharper than markets had anticipated, and largely reflected higher energy prices following the outbreak of the war in the Middle East at the end of February.
Outlook: Our Consensus is for average inflation to hover around current levels in Q2–Q3, before picking back up in Q4; still, inflation is set to remain within the Bank’s tolerance range.
Overall in 2026, average inflation should decelerate to a six-year low on a still-tight monetary policy, softer wage growth and a stronger real. Key factors to watch include extreme weather, changes in domestic fiscal policy ahead of the October general elections, the speed and timing of the Central Bank’s monetary policy easing, plus energy prices in light of the recent Iran war.