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BRAZIL: Analyst Views On August Inflation

BRAZIL
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  • JP Morgan says that there are crosscurrent forces on inflation going forward, but in their view the upside risks are larger than the downside risks for this year. The droughts registered in the country are likely to pressure prices ahead, especially food and electricity. Electricity prices will rise from September and a spike in food prices will follow, which JPM thinks could run close to 10%3m/3m saar in a few months of 4Q. However, lower oil prices should help to offset this, keeping their year-end IPCA forecast at 4.2% with asymmetric upside risks.
  • HSBC believes that deflation in August will be short lived, as some of the deflationary factors are expected to revert in September, most notably food and electricity tariffs. Beyond headline, most of the BCB’s preferred core measures dropped in August, and HSBC notes the decline in underlying services inflation, although it remains at a high level. On the back of these data, HSBC raises its 2024 inflation forecast to 4.4%, from 3.9%, while maintaining 2025 inflation at 3.9%.
  • Itaú notes that August IPCA came in below their expectations and with a better-than-expected breakdown, especially due to the downward surprise in underlying services. Going forward, they still expect some pressure on underlying services, which will likely end the year with an annual increase of around 5.5%.
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  • JP Morgan says that there are crosscurrent forces on inflation going forward, but in their view the upside risks are larger than the downside risks for this year. The droughts registered in the country are likely to pressure prices ahead, especially food and electricity. Electricity prices will rise from September and a spike in food prices will follow, which JPM thinks could run close to 10%3m/3m saar in a few months of 4Q. However, lower oil prices should help to offset this, keeping their year-end IPCA forecast at 4.2% with asymmetric upside risks.
  • HSBC believes that deflation in August will be short lived, as some of the deflationary factors are expected to revert in September, most notably food and electricity tariffs. Beyond headline, most of the BCB’s preferred core measures dropped in August, and HSBC notes the decline in underlying services inflation, although it remains at a high level. On the back of these data, HSBC raises its 2024 inflation forecast to 4.4%, from 3.9%, while maintaining 2025 inflation at 3.9%.
  • Itaú notes that August IPCA came in below their expectations and with a better-than-expected breakdown, especially due to the downward surprise in underlying services. Going forward, they still expect some pressure on underlying services, which will likely end the year with an annual increase of around 5.5%.