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Investing.com -- Brazil’s inflation rate rose to 5.1% year over year in February, up from 4.6% in January, driven primarily by a rebound in electricity prices.
Analysts predict further increases in the coming months, with a particular concern over the potential rise in food inflation.
The February inflation figure matched consensus expectations. The temporary reduction in electricity prices in January due to the Itaipu bonus contributed significantly to the increase in February. Inflation in most other main categories remained largely stable compared to the previous month.
Capital Economics predicts another 100 basis point hike in the Selic rate to 14.25% at the upcoming Copom meeting. The firm has not provided guidance on future moves, but given the weak activity shown in the Q4 GDP figures and leading indicators for Q1, it believes the next week’s move could mark the end of the tightening cycle.
However, with inflation significantly higher than the central bank’s target range and underlying inflation still strong, the risk of further hikes, possibly around 50-75 basis points, after the next week is growing.
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