Brazil Inflation To Drop

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Brazil Inflation To Drop

Brazil'S Inflation To Drop This Year

According to Brazil's President, the inflation situation in the country will improve this year. The president beleives that the inflation will drop even further and will reach the 3% target set by the central bank.

The central bank was expecting the inflation to drop by 3% by the mid of 2026. However, it seems that the decline in inflation will more quick than what the bank initially anticipated.

Inflation To Reach 3.0% In 2025

In the year 2025, inflation will decline due to the strong performance of the grain harvest, fuels, and electricity tariffs. That's the statement made by Brazil's present & highlights an improvement in the situation.

The prices will decline due to the higher rate differential between other economies and Brazil. This will also be helpful for the exchange rate of the local currency.

Recently, the central bank of Brazil hiked the rates by 100 bps (1.0%). The central bank also signaled yet another rate hike in March 2025.

Meanwhile, the Brazilian Real stays strong against the US Dollar and the other currencies. In fact, the winning streak of the local currency against the USD remains unseen in the last 20 years.

The government also remains committed to the spending review & will not move away from its commitment. Brazil's government wants to ensure that fiscal robustness is achieved.

If we look around, the inflation has been easing around the world. So, it is totally expected that inflation will drop further in Brazil between 2025 and 2026.

However, caution will be needed as the rate cuts worldwide could fuel demand. In turn, this could lead to a resurgence in inflation & affect everyone.

Another factor that could disrupt the easing in inflation is Trump's trade war against China. This could lead to a tit-for-tat situation where both countries will use the tariffs as a weapon.

Also, any US tariffs on the Brazil could also have significant impact on the Brazil's economy & could also fuel the inflation.

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