Brazil’s inflation likely begin moderating

The IPCA-15 series through mid-March implies that moderation in Brazil’s inflation has started finally, according to Societe Generale.

“Given the strong base effect and the trajectory of the inflation components in the IPCA-15, we estimate that full-month inflation fell to 9.48% yoy (0.51% mom) in March, a level last seen in September 2015”, says Societe Generale.

Housing inflation is likely to have slowed the sharpest, decelerating to 8.6% y/y from last month’s 14.9% y/y, added Societe Generale. Excluding an interruption because of seasonal factors, inflation is likely to be lower in 2016. However, high and uncertain trajectory of food inflation and persistent uncertainty of the BRL’s path suggests that it is less likely that inflation will considerably moderate for Central Bank of Brazil to begin lowering the key interest rate in 2016, noted Societe Generale.

“We continue to expect inflation to remain above 7% in 2016”, added Societe Generale.