Nowcasting inflation in Brazil: a welcome stabilization for consumer prices

Brazilian consumer price inflation likely held steady this month, according to our latest nowcast. That will be welcomed by the central bank, given the inflationary effects of the deadly flooding in recent months.

The CPI will likely grow 3.9% year-on-year for June, matching the May pace, according to the June 24 estimate from our inflation nowcast. The official data will be released on July 10.

CEIC’s nowcast relies on high-frequency and alternative data within a machine-learning model to deliver weekly inflation estimates, offering insights into the underlying factors and high-frequency indicators shaping inflation dynamics.

One of the inputs analyzed by our nowcast model is the weekly CPI index (IPC-S), an alternative dataset provided by the Getulio Vargas Foundation. It slowed to a 0.45% month-on-month pace in the third week of June, down from 0.57% in the previous week.

Rising food prices helped drive the CPI uptick in May, but the picture is more mixed this month. Our nowcast also considers prices for individual foodstuffs. Bananas, tomatoes, and mangoes saw the steepest price increases in the first 24 days of June, rising 28%, 27% and 26% respectively over the previous month's levels. By contrast, watermelons, lettuce, and potatoes saw the steepest declines, dropping 29%, 20%, and 18% on the same basis.

Brazil's central bank kept interest rates unchanged at its June 19 meeting, marking the end of a year-long monetary easing cycle. Markets expect interest rates to remain at the current 10.5% through the end of 2024, but the inflation rate is still expected to rise slightly, reaching 3.98% year-on-year.

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