JPMorgan, Barclays and Credit Suisse see faster inflation in Brazil

(Bloomberg) – Major international banks, including JPMorgan & Chase Co, Barclays Plc and Credit Suisse Group AG, have warned that Brazil’s inflation expectations for 2022 are at risk of deteriorating further after consumer prices rose more than the expected.

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Annual inflation topped 10% in mid-September, the highest since 2016 and well above what economists expected in a Bloomberg survey. Fuel prices increased more than 2% from the previous month, while food prices increased more than 1%. The data came after the central bank raised interest rates by a full percentage point and signaled another increase of the same magnitude next month.

JPMorgan now expects consumer prices to rise 8.4% this year, up from its previous forecast of 7.9%. The bank also revised up its projection for 2022 to 3.9% from 3.7%.

“The last time we reviewed our 2022 scenario we were looking for this year’s inflation at much lower levels,” wrote JPMorgan economists Vinicius Moreira and Cassiana Fernandez in a research note. “We believe that inertial effects should also make 2022 higher.”

Read more: Brazil’s double-digit inflation drives bets for higher rate hikes

Barclays and Credit Suisse are even more pessimistic: both banks revised up their inflation forecasts for 2021 to 8.7%. For next year, Barclays expects consumer prices to rise 4%, while Credit Suisse expects them to rise 5.2%.

“The latest dynamics show that there is no room left to absorb the new pressures that may still arise from the ongoing reopening of the economy and the (modest) improvement in the labor market,” wrote Barclays analyst Roberto Secemski.

Brazil’s central bank is targeting inflation at 3.75% this year and 3.5% in 2022, which remains its main time horizon for monetary policy.

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