Brazil Weekly Inflation Risk Monitor: Inflation risks are less extreme, but still tilted higher

Research evidence excerpt

Brazil Weekly Inflation Risk Monitor: Inflation risks are less extreme, but still tilted higher

, potentially leading to higher food inflation

throughout 2027. The risk is not confined to domestic production: concerns about global

sugar supply, lower Asian output, and climate-related disruptions in major producing

regions have already started to influence commodity markets. At the same time, recent

food disinflation appears largely seasonal, reflecting favorable harvest conditions and

lower prices for fresh food items, rather than a broad-based improvement in supply

fundamentals.

A second source of uncertainty comes from energy prices. The renewed escalation of

geopolitical tensions in the Middle East has pushed oil prices sharply higher, reviving

concerns about fuel inflation. While the government has temporarily cushioned the pass-

through through fuel subsidies and delayed decisions that could affect gasoline pricing,

these measures are unlikely to eliminate the underlying pressure if oil prices remain

elevated. Moreover, the eventual withdrawal of gasoline and diesel subsidies could

generate additional inflationary pressures over the next 12 months. The recent debate

around changes in ethanol blending requirements highlights the importance of policy

decisions in shaping the short-term inflation path, but ultimately the trajectory of oil

prices remains the key variable for both transportation costs and inflation expectations.

Against these risks, there are also important mitigating forces. Producer price indicators

have continued to soften, food prices have recently provided relief, cattle prices remain

subdued amid weak domestic demand, and some market-based measures point to

2 Brazil Weekly Inflation Risk Monitor | 17 July 2026

CR