Analysts On Brazil Inflation Following Friday's IPCA Prints

**Goldman Sachs

• Inflation is now not only very high but also highly disseminated; with headline projected to remain above 10% until August 2022. The broad based and likely lasting shock to commodity prices and other logistical/input production costs is expected to keep near-term consumer price inflation pressures high, only partially offset by the announced decline in electricity tariffs.
• Against this backdrop, there is a growing risk that backward looking price and wage setting mechanisms (with resetting wage contracts incorporating cost-of-living adjustments) will keep inflation increasingly inertial (sticky).
• The challenging current and prospective inflation backdrop and FOMC hawkish signaling require a conservative calibration of monetary policy.

**JPMorgan:

• Brazil’s inflation continued marking multi-year highs, with widespread increases and the largest upside surprise in almost two decades.
• As a result, core IPCA is estimated to have risen 0.99%m/m, above JPM’s call of 0.80%. The IPCA accelerated from 10.5% to 11.3% and core IPCA accelerated from 8.4% to 9%. Both are at the highest levels since 2003.
• In JPM’s view, Friday's print strongly supports their thesis that the BCB will continue the tightening cycle beyond May, despite the COPOM’s message that the last hike could happen in the next meeting.
• JPM now see IPCA at 7.6% this year and at 4.2% in 2023. With this revised path, they now expect that headline inflation will reach almost 12%oya in April, the peak of their forecasted path, and will decelerate to slightly below 10%oya in August, then moving to 7.6%oya in December, above our previous expectations of a 7.1% rise.