The official inflation “preview” released this Friday (26) brought good news about the trajectory of price changes in the short term, including some downward revisions of the month’s closed IPCA. However, even with benign IPCA-15 core data, economists warn that the Central Bank has been trying to de-anchor expectations and that, as a result, there is no consensus on the Copom’s next interest rate decision.
April’s IPCA-15 registered an increase of 0.21%, while the accumulated index over the last 12 months slowed from 4.14% to 3.77% in one month.
For Igor Cadilhac, economist at PicPay, from a qualitative point of view, the reading of the indicator was better than expected and the almost widespread improvement in the cores was encouraging, reinforcing the disinflationary scenario in the short term.
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Although in the eyes of the Selic cuts cycle, this healthy outlook may counterbalance the more uncertain external scenario, Cadilhac says that, given the likely worsening of inflation projections for 2025 in the BC model, this performance should not reduce expectations of a reduction in 25 basis points in Selic in the next Copom, interrupting the sequence of 0.50 pp cuts
For now, the economist says he maintains his projection of an IPCA of 3.6% at the end of the year. Possible downside risks include the fight against inflation in a synchronized manner across the world, the good contagion of the prices of goods over other prices and the behavior of the cores and their inertia.
“On the other hand, we have monitored greater resilience in services inflation due to a tighter product gap and wage increases given low unemployment, recent real gains and the minimum wage rule”, he lists.
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João Savignon, head of macroeconomic research at Kínitro Capital, highlights in the indicator released today both the core average, which stood at 0.19%, compared to 0.23% in the previous month – in 12 months, it fell from 3.88 % to 3.61% – like the diffusion of the index, which went from 52.6% of items to 49.8%. But he mentions that the diffusion of services rose from 55.4% to 62.5%.
The economist states that the projection of 0.37% for April’s closed IPCA should be revised slightly downwards, since part of today’s surprise focused on items whose variations are repeated in the full index.
He assesses that given the current inflationary scenario, the BC could continue with its current guidance, promoting another 50 bps cut at the May meeting and indicating a slowdown in the pace from the June meeting onwards, but considers what other factors should play a role pressure on the decision.
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“The recent change in communication from the monetary authority due to the external scenario, combined with the repricing of assets and the new de-anchoring of inflationary and fiscal expectations should lead the Copom to anticipate this slowdown in the pace of cuts and a higher terminal Selic, of 9 .75%”, he estimates.
Claudia Moreno, economist at C6 Bank, also assesses that the April slowdown was spread across several items, showing a benign composition. However, she considers that underlying services inflation, a category that excludes the most volatile items and is the one most closely watched by the Central Bank, remains under pressure from the heated labor market. “Underlying services rose 0.38% in April, accumulating an increase of 4.9% in 12 months, that is, they continue to operate at a very high level.”
In C6 Bank’s view, the persistence of services inflation added to the prospect of higher interest rates in the US for longer could lead to a change in the BC’s flight plan, which initially predicted another 0.50 point cut at the meeting. May.
“Recent speeches by the monetary authority show concern about the deterioration of the external scenario and the recent increase in inflation expectations from the Focus Bulletin. With this, we believe that the chance of the BC being more cautious and reducing the magnitude of the next interest rate cut to 0.25 points has increased”, says Claudia.
The vision of Tatiana Pinheiro, chief economist for Brazil at Galapagos Capital, is similar. “In our opinion, the disinflation process here guarantees that the Copom should continue cutting interest rates, but at a slower pace due to the BC’s biggest concern being with the disinflation process in the USA, and the situation there continues to be skewed for the worse”, he explains. .
Galapagos maintained its expectation of a Selic of 9.25% at the end of 2024, with interest cuts of 25 bps from May onwards.
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Leonardo Costa, economist at ASA Investments, states that, based on today’s data, the projection for April’s IPCA should be revised from 0.34% to something around 0.30%.
“The April IPCA-15 had a more benign quality in the services core. However, the level is still high and leading indicators continue to indicate a difficult path for the slowdown ahead”, he estimates, highlighting the heated job market and firm consumption as the main vectors of concern.
Relief
For André Cordeiro, senior economist at Banco Inter, the IPCA-15 result reinforces the dynamics seen in March, giving new signs that the recent worsening in the inflation profile was the result of the seasonality typical of the period.
He assesses that, given the recent worsening of the external scenario and, consequently, the greater caution on the part of the Central Bank, the continuity of the disinflation process brings relief and suggests that there is room for the Copom to continue the trajectory of cuts already communicated.
“We maintain the expectation of a cut of 50 basis points at the May meeting, anticipating a more cautious statement due to the current international context, with the Committee starting to give greater weight to the evolution of the external scenario and withdrawing the ‘guidance’ for the next steps due to greater uncertainty about the future behavior of inflation since the transmission of the international worsening to domestic inflation via exchange rates is not completely mechanical”, he explains.
Cordeiro says that the return to the previously communicated cuts trajectory will depend on the progress of an improvement in the external scenario. “The maintenance of uncertainty at the current level already means a slowdown in cuts from June onwards, with a possible worsening of the scenario which could even lead to a pause in the cycle of cuts.”
