April’s IPCA-15 keeps a negative qualitative tone in a week marked by milder speeches from Central Bank directors – 04/25
Although the figure was marked by a downside surprise in airline fares, the core inflation average came in above expectations. On the upside, in addition to the contribution from food at home, the highlight was the variation in industrial goods, mainly driven by the upward movement in the personal care subgroup. These items were the main drivers behind the deviation of the core average from expectations, keeping the 12-month accumulated level at 5%. Combined with still-elevated levels of underlying services (6.4% YoY), current inflation continues to weigh negatively on monetary policy decisions.
At the International Monetary Fund, speeches from Central Bank directors signaled a more dovish tone from the committee. Although the official communication was kept, reiterating the guidance from the March meeting — of a smaller adjustment at the May COPOM — the current scenario of macroeconomic uncertainty reinforced the need for caution. Particularly notable was the statement by Economic Policy Director Diogo Guillen, who used the term “gradualism,” a phrase employed in recent Central Bank communications as a signal for an adjustment between 25bps and 50bps. For now, we keep our expectation of a 50bps hike in the May meeting, followed by a 25bps increase in June, reaching a terminal rate of 15.0%.
Internationally, Donald Trump adopts a more moderate tone toward the FED chairman and China. After harsh criticism of monetary policy and the trade tariffs imposed on China, Trump backtracked by stating he does not intend to remove FED Chairman Jerome Powell and showed willingness to gradually reduce the 145% tariffs on Chinese products, provided progress is made on a potential agreement. According to Trump, his team is keeping trade talks with China, although Chinese authorities deny the existence of any formal dialogue.
For more details, please check our Weekly Report 110.
