Key facts
- Brazil's government now expects 2024 inflation to reach 5.1%, surpassing the central bank's 3% target.
- The increase is attributed to supply-side pressures on food prices and rising costs for manufactured goods.
- Underlying inflation measures indicate a recent slowdown.
- The economic growth forecast for 2024 remains at 2.3%.
- Brazil's central bank has implemented three consecutive 25 basis point interest rate cuts, bringing the Selic rate to 14.25%.
Brazil's government has revised its inflation forecast upward for 2024, now projecting consumer prices to reach 5.1%, which is above the central bank's target of 3%. The Finance Ministry's Economic Policy Secretariat cited persistent supply-side pressures on food prices, particularly for fresh products like milk, rice, and beans, which have seen increases beyond historical patterns. Additionally, inflation in manufactured goods has accelerated due to higher prices for personal care items, while services inflation remains elevated. Despite these pressures, the ministry noted that underlying inflation measures have shown a slowdown in recent months. The government has maintained its forecast for economic growth at 2.3% for the year, indicating resilient activity through May. However, it cautioned that high real interest rates are expected to temper future growth as their full effects gradually impact the economy. Brazil's central bank has continued its monetary easing cycle, implementing a third consecutive 25 basis point interest rate cut in June, bringing the benchmark Selic rate down to 14.25%. The bank has signaled that borrowing costs must remain restrictive to guide inflation back to its target. Looking further ahead, the government adjusted its inflation estimate for 2027 to 3.6% from a previous 3.5%, while slightly reducing its gross domestic product growth forecast for that year to 2.5% from 2.6%.