Inflation loses steam in April but breaches 12-month target

Brazil’s consumer price index IPCA rose 0.31 percent in April, in line with market estimates. Data shows that inflation is beginning to ease off, after a reduction in fuel prices. However, 12-month inflation reached 6.7 percent, breaching the upper limit of the government’s 5.25-percent target.

Though fuel prices dropped after ten months of increases, the IPCA was pushed upward by medicines and food products. Demand for commodities has been the most significant cause of inflation in Brazil over the past few months, with meat prices rising 35 percent in 12 months.

In an attempt to bring inflation back to the target range, the Central Bank increased benchmark interest rates from 2 to 3.5 percent since the beginning of the year — and signaled further hikes in the near future.

Analysts from investment firm Guide Investimentos believe “inflation expectations for 2022 will keep rising,” considering the current scenario for commodity prices and the influence of next year’s elections on the foreign exchange rate. As a result, they expect interest rates to hover around 6.25 percent by the end of 2021.

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