Brazil inflation matches forecasts, leaving room for rate cuts but not removing price risks

📌 Brazil’s April inflation rose to 4.39% year-on-year, almost in line with the 4.40% forecast, while monthly inflation eased to 0.67% from 0.88% in the previous month. The data suggests that annual price pressure is still edging higher, but short-term momentum has cooled.
💡 The positive point is that inflation remains within the 3% target band, plus or minus 1.5 percentage points, meaning the Central Bank of Brazil is not yet forced to stop its easing cycle. With the Selic rate at 14.50%, markets still have a basis to expect cautious rate cuts in upcoming meetings.
⚠️ Still, the picture is not free of risk, as food and beverages rose 1.34%, becoming the main driver of CPI. This category directly affects household inflation expectations, so if food prices stay hot, the BCB will find it difficult to ease too quickly.
🔎 Externally, oil prices and geopolitical risks remain major variables. The 2026 year-end inflation forecast has been raised to 4.91% after nine straight weeks of increases, showing that markets are still not fully convinced price pressure is sustainably under control.
✅ In the short term, data close to forecasts helps the Brazilian real avoid a negative shock and may support bonds if May inflation stays stable. However, this positive scenario depends heavily on oil prices not rising sharply for a prolonged period and food pressure not spreading further.
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