The further rise in Brazilian inflation, to 7.3% y/y in the middle of May, can partly be pinned on unfavourable base effects, but there are also signs of a broader increase in goods inflation. While this inflation spike should start to unwind in the next few months, the central bank is likely to remain hawkish, with another 75bp hike in the Selic rate (to 4.25%) at the next meeting in June looking almost certain.
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