Brazil Inflation Surges Past Forecasts on Iran War Oil Shock

a367kmub46a]0g{shybcgum)_media_dl_1.png Brazil's central bank, national

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(Bloomberg) — Brazil’s inflation accelerated much more than expected in March as the Iran war’s energy shock ripples through Latin America’s largest economy.

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Official data released Friday showed consumer prices rose 0.88% from the previous month, above all 40 estimates in a Bloomberg survey of economists that had a median estimate of 0.77%. Inflation gained 4.14% from a year earlier.

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Interest rate futures with the contract due January 2028, an indicator of market sentiment of monetary policy, rose 12 basis points in morning trading following the hotter-than-expected inflation release.

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Higher fuel costs are squeezing Brazilians, prompting the government to act to cushion the impact ahead of elections later this year. The resulting inflationary pressure is complicating central bankers’ plans to keep cutting double-digit interest rates.

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Last month, the monetary authority lowered the benchmark Selic for the first time since 2024 after making progress in efforts to bring inflation to its 3% target. Those gains are being eroded as the ongoing conflict in the Middle East drives up oil prices.

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What Bloomberg Economics Says

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“Brazilian inflation came in hotter than expected in March on a double whammy of soaring food and fuel prices, partly an early impact of the Iran war. High uncertainty on the war’s duration and uncomfortable underlying inflation prints may not stop the central bank from cutting rates, but will likely keep it cautious. For now, we anticipate another 25-basis-point cut at the April meeting, bringing the rate to 14.5%.”

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—Adriana Dupita, Brazil Economist

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—Click here for full report

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Transportation costs jumped 1.64% last month, representing the largest contributor to March’s price gains, the statistics agency said. Food and beverage prices as well as housing costs all picked up.

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President Luiz Inacio Lula da Silva has responded with a series of measures, including slashing taxes and providing fuel subsidies, to shield consumers from price increases. 

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—With assistance from Giovanna Serafim.

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(Updates to add comment from Bloomberg Economics after fifth paragraph)

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