Brazil Weekly Inflation Risk Monitor: Energy and climate pressures

Research evidence excerpt

Brazil Weekly Inflation Risk Monitor: Energy and climate pressures

ource: BofA Global Research estimates, Bloomberg, BCB

BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Energy developments dominated inflation news this week, with risks tilted to the upside

despite near‑term policy smoothing. The ongoing oil shock linked to geopolitical

tensions continues to pressure global fuel prices, feeding into domestic costs and

inflation expectations. While government measures such as subsidies and Petrobras

pricing adjustments aim to cushion the impact, they are seen as mitigating rather than

eliminating underlying pressures, particularly as diesel remains well above pre‑war levels

and supply risks persist.

On the domestic side, electricity tariffs remain a key concern, with a high probability of

El Niño extending the period of more expensive tariff flags and increasing reliance on

thermal generation. Authorities have implemented measures to partially offset these

pressures, though with limited and uneven effects. Most notably, ANEEL approved the

use of up to R$5.5bn from the anticipation of payments related to the Uso do Bem

Público (UBP)—a fee paid by hydropower generators to the government for the use of

water resources. Under new rules, generators can settle these obligations upfront at a

discount, converting future payments into immediate resources that are passed through

to consumers via lower tariffs, particularly in high‑cost regions. This mechanism is

distinct from the so‑called Itaipu bonus, which reflects the distribution of occasional

positive balances from Itaipu’s commercialization account directly to consumers as bill

credits. While both tools provide temporary relief, their impact is either regionally

2 Brazil Weekly Inflation Risk Monitor | 21 May 2026

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