Brazil: Still low headline and core inflation – Rabobank

The IPCA, Brazil’s official inflation index – posted a gain of 0.22% m/m in April, shy of consensus (0.28%) and Rabobank’s forecast (0.30%) and BCB’s projection as of late in March (0.33%), points out the research team at Rabobank.

Key Quotes

“The year-on-year reading edged higher by a tenth to 2.8%, but remains below the low-end of the BCB’s target zone (4.5% +/- 1.5 p.p.).”

“Underlying trends remain at depressed levels (2.0-2.5% annualized, sequentially), standing around the lowest levels in nearly two decades.”

“Despite ongoing global pressures for a stronger USD (risking a slight CPI pass-thru), the low core inflation (and expectations) continue to feed downside risks for demand-led inflation.”

“All in all, yesterday’s April IPCA report seem to reinforce the BCB’s plan to deliver another 25-bp rate cut (to a historical low of 6.25%) in next week’s Copom policy meeting.”