The drop in Brazilian inflation to a 30-month low of 4.2% y/y in the middle of April was mainly a result of a sharp decline in food inflation, which is at its lowest rate since the start of the pandemic. With core inflation still strong and the BCB striking a hawkish tone in recent communications, we doubt that policymakers will pivot to interest rate cuts imminently. That said, the odds are shifting slightly towards an earlier start to the easing cycle than our current forecast (for Q4).
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