Our view: The headline figure came in lower than expected, with core services slightly above our projections (in line with the suggested risk balance). The main highlight of the release is food at home. Today’s surprise adds a bearish bias to our short-term projection. The Core Services metric reinforces maintaining the Selic rate at 10.50% until the end of 2024.
The June IPCA registered an increase of 0.21% MoM, below our projection of 0.28% and the market median of 0.30% [0.25;0.38]. However, there was an acceleration in the 12-month accumulated rate to 4.23% from 4.06% in the June IPCA-15 and 3.93% in the May IPCA.
Compared to our number, the main downside surprise was food at home, both fruits and vegetables and excluding fruits and vegetables (milk). Notable items were those affected by the rains in Rio Grande do Sul, dissipating the observed shock.
In Administered Prices, gasoline was the main upside surprise (after a downside surprise in the June IPCA-15), and electricity came slightly below expectations (after an upside surprise in the June IPCA-15). The item was impacted in June by the 6.76% tariff adjustment in Belo Horizonte from May 28.
Industrial Goods came slightly below expectations, with a notable mention of new cars (after an upside surprise in the June IPCA-15).
In Core Services, the higher number was explained by surprises in recreational services and banking services.
Finally, the average of core indices varied by 0.22%, below our projection and decelerating compared to the June IPCA-15 and May IPCA.
How should the BCB receive this release? The BCB had a downside surprise in the headline projection in the June RTI, which was +0.33%, but possibly an upside surprise in Core Services. Today’s data confirm slow disinflation and reinforce our view of maintaining the current interest rate level until the end of 2024.
For more information, please check our IPCA Report.
