By Gabriel Burin
(Reuters) – The rising trend of Brazil’s consumer prices likely slowed in March from February due to a moderation in energy costs, but food inflation probably remained high, a Reuters poll of economists found.
Official data to be released on Friday are expected to show consumer prices increased 0.56% last month vs. 1.31% in February, according to the median estimate of 20 economists polled April 2-7.
“The slowdown is a product of lower electricity tariffs compared to February and will be partially offset by higher food inflation, pushed by eggs and coffee, and air fares,” Morgan Stanley analysts wrote in a report.
Domestic egg prices have risen as the U.S. has almost doubled imports from Brazil following a massive cull in the U.S. after a bird flu outbreak sent prices soaring there.
Meanwhile, global prices for arabica coffee have gained more than 20% this year on top of a soaring 70% in 2024 as Brazil – producer of nearly half the world’s arabica – suffered one of its worst droughts on record.
Even before Trump’s back-and-forth tariff decisions this month, the trajectory of food costs in Latin America’s No.1 economy was increasingly worrying consumers and government officials.
The causes are a strong labor market, continuous foreign demand for Brazilian commodities, and bad weather, which have countered government measures and the central bank’s ongoing tightening campaign.
Citi analysts noted in a report: “although we expect the food component to be the main upside pressure at 1.3% on the month… the less volatile components are also expected to come in at high levels.”
Both services and underlying measures of inflation should print around 0.5% on the month in March, for annualized readings above 6%, well above the official inflation target, the bank added.
The goal for Brazil’s headline inflation is 3.0% plus/minus 1.5 percentage points. The consensus forecast for 2025 is 5.65%, according to the latest weekly central bank survey among economists.
The central bank has raised its benchmark interest rate by 375 basis points since September to 14.25% in an anti-inflation drive while other major central banks have been easing policy.
However, it suggested this month stricter monetary policy could take more time to show results.
In the Reuters survey, the 12-month inflation gauge was forecast to accelerate to 5.48% in March from 5.06% in February, which would be its fastest pace since February 2023.
Brazilian policymakers have said the new U.S. trade framework and its ramifications have added “multiple layers of uncertainty”, without clear inflationary or disinflationary effects so far.
Supporting the first scenario, Brazil’s real currency weakened past the mark of 6 per U.S. dollar this week and remained volatile amid the global market rout, potentially stoking imported inflation.
(Reporting and polling by Gabriel Burin; Editing by Chizu Nomiyama)
Comments