Around half of the drop in Brazilian inflation over the past year has been driven by a collapse in food inflation, which is now close to bottoming out. But there is also growing evidence that the recession of the past couple of years is starting to weigh on broader inflation pressures in the economy. Accordingly, we’re nudging down our inflation forecasts for 2017 and 2018 and think the Selic interest rate will now be cut to a low of 8.00% by the end of this year (from 8.5% previously).
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