📈 Further from the target

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IN THIS ISSUE

• The latest on Brazilian inflation

• Inequality goes down — but can it last?

• Privacy advocates score a win against Meta

Brazil inflation inches upward once again

Consumer prices in Brazil climbed further in April, according to data published minutes ago by the Brazilian Institute of Geography and Statistics (IBGE). The country’s preferred inflation gauge, the IPCA index, rose to 5.53% over the 12 months through April, up from 5.48% in March. 

State of play. The increase pushes the index further above the government’s 4.5% target ceiling. The data comes two days after the Central Bank bumped Brazil’s benchmark interest rate to 14.75%. While that is the year-end prediction for many market analysts, the fact that prices continue to seem untamed upends the future of monetary policy for the coming months.

👉 Why it matters. Food costs have risen for the third consecutive month to 7.81% in 12 months. And while price increases slowed down on a month-to-month basis (from 1.17% in March to 0.82% in April), the inflation diffusion rate went from 55% to 70% of items.

• “More items rose in price, even if they carry less weight in the index,” said Fernando Gonçalves, head of the IPCA unit at IBGE.

Expensive mug. Ground coffee, a staple in Brazilian pantries, continues its price escalation. Twelve-month inflation for the item has grown from 2.5% in May 2024 to a whopping 80% a year later — a consequence of unfavorable climate conditions that have disrupted harvests since 2021 in a country that accounts for 40% of the world’s coffee supply.

• Poor harvests in Vietnam, the world’s second-largest producer, have exacerbated the situation. As a result, global coffee prices have climbed to their highest levels in nearly three decades.

• Coffee producers are increasingly worried about the impact of rising prices on consumer behavior. As we reported in our Brazil Agro newsletter, Brazil has seen a surge of “coffee-flavored drinks” as an alternative to real coffee. Meanwhile, a Datafolha survey shows that 49% of Brazilians are drinking less coffee.

What’s next. Many economists have long argued that reining in public spending is essential to curbing inflation. But under President Luiz Inácio Lula da Silva, government outlays have helped fuel economic growth — a trade-off his administration appears willing to make as it eyes re-election.

• Meanwhile, neither the judicial nor legislative branches have shown any inclination toward austerity in managing their own budgets.

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Brazil lowers inequality levels, but can it last?

Brazilian households saw record-high incomes in 2024, fueled by rising wages and steady government aid, according to new data released by the Brazilian Institute of Geography and Statistics (IBGE).

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