Business · Economy · 2 hrs ago
Brazil inflation expectations rise after Lula’s election victory
Inflation expectations in Brazil rose after Lula’s recent election victory, adding to pressure on the central bank.
A weaker Brazilian currency and the El Niño climate pattern are also adding to inflation risks.
The central bank’s inflation target is 3%, and expectations for inflation 24 to 36 months ahead rose from 3.7% in October to 3.9% in November.
An index measuring how far expectations sit from the target jumped to 0.67, a level similar to 2015.
The article says expectations have become more spread out among analysts, another sign that the target is less firmly guiding forecasts.
The central bank has paused its cycle of interest-rate cuts amid this uncertainty.
Economists warn that bringing inflation down could weaken economic activity, with some sectors forecast to contract in 2027 even as inflation remains higher.
Inflation expectations in Brazil rose after Luiz Inácio Lula da Silva’s recent election victory, according to an analysis published by Estadão.
The median expectation for inflation 24 to 36 months ahead increased from 3.7% in October to 3.9% in data from November 9.
An index measuring how far expectations are from the inflation target rose from 0.39 to 0.67, a level similar to 2015.
The analysis links the deterioration to a weaker currency and the El Niño climate shock, and says uncertainty over the central bank’s target and autonomy had also affected expectations.
The central bank stopped its cycle of Selic rate cuts amid the rising expectations.
- Who
- Brazil’s central bank and market analysts are central to the story; the article cites economist Silvia Matos.
- What
- Inflation expectations rose after Lula’s election victory, and an index of their distance from the target increased.
- When
- The post-election period; Focus data dated November 9 showed the increase.
- Where
- Brazil.
- Why
- The article cites a weaker currency, the El Niño climate shock, and uncertainty about the inflation target and central bank autonomy.
This story does not have two clearly opposing sides.
Matos’s calculations show that inflation expectations began to become less anchored.
The index partially improved, but expectations later deteriorated again in 2024 and improved incompletely the following year.
The median expectation for inflation 24 to 36 months ahead was 3.7%.
Focus data showed the median expectation at 3.9%, with the index rising from 0.39 to 0.67.
- Inflation expectation
- 3.9% for 24 to 36 months ahead in Focus data dated November 9
- Previous expectation
- 3.7% average in October
- Index increase
- 0.39 to 0.67
- Current inflation target
- 3%
- Central bank rate
- The central bank interrupted its Selic rate-cut cycle
1 source
What people are saying
The current picture is very worrying