Brazil’s inflation outlook diverges from the pack

Data released over the past month have highlighted the contrasting outlook for inflation in Brazil compared with that of the rest of the region. After a brief period within the central bank’s target range at the end of last year, it looks like Brazilian inflation rose back above target at the start of this year. And with the government’s austerity programme taking shape, it is becoming increasingly apparent that inflation will climb further from here. Tax hikes on loans and fuels could push inflation up to 6.7% y/y next month. And as the government scales back support for utility companies, we think that inflation could top 7% y/y by Q2.