Economists surveyed between February 4 and 9 expect Brazil's annual inflation to have inched higher to 4.44% in January from 4.26% in December, according to the poll median of 20 forecasters. If realized, that estimate would leave inflation within the central bank's tolerance band - below the 4.50% ceiling that sits 1.5 percentage points above the 3% midpoint target - and would mark the third month running that inflation remains under the upper limit.
The range of forecasts in the poll spanned from 4.38% to 4.60%, and only one respondent placed January inflation above the official 4.50% threshold. The national statistics agency, IBGE, is scheduled to publish the full January consumer price data on Tuesday.
On a month-over-month basis, prices are projected to have risen 0.32% in January after a 0.33% increase in December. A bi-weekly inflation reading already indicated meaningful gains in health services and personal care products; data covering the period up to mid-January recorded a 1.38% increase in the personal hygiene segment, which includes skin care items that see elevated demand during Southern Hemisphere summer months.
Analysts point to a mix of forces behind January's expected pattern. Gabriel Bisctrizan, an analyst at Sicredi, noted that recent increases in fuel-related taxes and adjustments to public transport fares are likely to overpower a partial rollback in electricity prices. He added that food inflation has remained subdued, aided by weaker prices for industrial and semi-processed food items, while underlying services inflation is currently contained.
Last month's hike in a goods transport tax - an element that contributes materially to the final cost of gasoline - more than offset recent fuel price reductions implemented by state-run oil producer Petrobras. Meanwhile, an abundant harvest in the previous year has eased upward pressure on food prices, and an ongoing contraction in industrial activity has curtailed manufacturers' ability to pass through costs to consumers.
Despite these moderating factors, some forecasters expect services disinflation to proceed more slowly. Buysidebrazil analysts warned that services price declines will be gradual because the labour market remains hot and wage pressures persist. They nevertheless argued that a progressive moderation in activity, lower inflation inertia and a steadier exchange rate should help this segment cool over the course of the year.
The recent appreciation of the Brazilian real - attributed in part to persistently high interest rates - has also been cited as a key influence in bringing inflation down. Policymakers at the central bank signalled last week an intention to begin lowering borrowing costs in March, while emphasising that policy rates would remain at restrictive levels even as cuts commence. Markets have increasingly factored in the prospect of a March easing, a development that would follow the run of inflation readings that appear to be holding below the central bank's tolerance limit.
What to watch next
- The full January CPI release from IBGE, due Tuesday, which will confirm whether inflation matched the poll median.
- Subsequent readings on services inflation and labour market indicators, which will influence the pace of disinflation in services and the central bank's policy path.
- Movements in fuel taxation, public transport fares and electricity prices, each of which can swing monthly inflation prints.