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BRAZIL: IPCA Inflation Due Tomorrow, Core CPI Still Under Significant Pressure

BRAZIL
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  • IPCA inflation figures for January are due tomorrow, with headline prices expected to rise by 0.17% m/m, according to the atest Bloomberg consensus, following a 0.52% gain in December. In annual terms, headline inflation is seen moderating to 4.58% y/y, from 4.83%, keeping it above the top of the BCB’s target band. A decline in electricity prices will help to contain headline inflation, offsetting a pick-up in transportation costs. Food price pressures will also remain in focus, with another solid m/m gain expected.
    • JP Morgan says that despite weaker growth numbers lately, the January inflation data should show core CPI under significant pressure, particularly due to high core services prices. Concerns are not limited to the core components, with President Lula signalling his unease over rising food prices several times recently.
    • JPM says that the high and widespread inflationary process at the start of this year is the main factor that could lead to a higher-than-anticipated Selic rate. However, the downside risk they see to GDP tempers some of this, and overall they see balanced risks to their 15.25% H1 2025 Selic rate forecast.
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  • IPCA inflation figures for January are due tomorrow, with headline prices expected to rise by 0.17% m/m, according to the atest Bloomberg consensus, following a 0.52% gain in December. In annual terms, headline inflation is seen moderating to 4.58% y/y, from 4.83%, keeping it above the top of the BCB’s target band. A decline in electricity prices will help to contain headline inflation, offsetting a pick-up in transportation costs. Food price pressures will also remain in focus, with another solid m/m gain expected.
    • JP Morgan says that despite weaker growth numbers lately, the January inflation data should show core CPI under significant pressure, particularly due to high core services prices. Concerns are not limited to the core components, with President Lula signalling his unease over rising food prices several times recently.
    • JPM says that the high and widespread inflationary process at the start of this year is the main factor that could lead to a higher-than-anticipated Selic rate. However, the downside risk they see to GDP tempers some of this, and overall they see balanced risks to their 15.25% H1 2025 Selic rate forecast.