Brazil: Inflation comes in at an over two-year high in March
Latest reading: Inflation overshot the upper bound of the Central Bank of Brazil’s 1.5–4.5% tolerance band for the sixth month running in March, increasing to 5.5% from February’s 5.1%. March’s figure marked the highest inflation rate since February 2023 and was largely aligned with market expectations. Looking at the details of the release, prices for transportation increased at a quicker pace in March, as did prices for food and beverages plus housing.
Accordingly, the trend pointed up, with annual average inflation rising to 4.6% in March (February: 4.4%). Meanwhile, core inflation rose to 4.9% in March from February’s 4.5%.
Finally, consumer prices increased 0.56% from the previous month in March, a smaller increase than the 1.31% rise seen in February.
Outlook: Our Consensus is for inflation to average around March’s levels in Q2 and to peak in Q3. A robust labor market and wage growth should continue driving up price pressures. Moreover, despite a widening positive interest rate differential versus the U.S., Brazil’s currency is set to average weaker in 2025 than in 2024, spurring imported inflation. Our panelists see a gradual deceleration in inflation from Q4 but only expect inflation to return within the Central Bank’s tolerance band in Q3 2026, as it will take time for past interest rate increases to restrain domestic demand. Overall in 2025, our Consensus is for inflation to surpass both 2024’s level and the Central Bank’s tolerance band. Upside risks include extreme weather impacting electricity and food prices.