RGE expects the IPCA-15 inflation reading to have eased to 0.73% m/m in December after growing 0.83% m/m in November, pushing the yearly growth to 5.83% from 5.63% and away from the central bank target of 4.5% (+/- 1%). A smaller increase in food prices (RGE: 1.8% m/m) than a month ago (2.1% m/m) mainly explains the expected lower inflation print. Meanwhile, the demand-pull pressures are expected to remain in place, keeping core prices under pressure. We expect inflation to be close to 6% in 2010 and around 5.3% in 2011.
Figure 1: Brazil’s Consumer Prices (IPCA-15, y/y)