Worst Enemy of Brazil Inflation to Help Keep Prices in Check

(Bloomberg) -- Analysts are growing upbeat about Brazil’s inflation prospects this year as the nation’s currency, often a source of pressure on prices, is forecast to remain little changed in 2018.

Another reason for the local optimism is the outlook for global inflation, which is expected to remain subdued as synchronized growth in developed economies should keep the U.S. dollar from strengthening, which mitigates another risk for the Brazilian currency, says XP Investimentos Chief Economist Zeina Latif. And even in a worst-case scenario of an external shock in the coming months, it would take time for currency swings to have an impact on prices, leaving 2018 inflation in Brazil unscathed, Santander economist Mirella Hirakawa says.

The real has traded in the 3.12-3.31 per dollar this year, and is expected to close 2018 at 3.30, according to median estimate from economists surveyed by Bloomberg.

--With assistance from Walter Brandimarte

To contact the reporters on this story: Patricia Lara in Sao Paulo at plara6@bloomberg.net, Josue Leonel in Sao Paulo at jleonel@bloomberg.net.

To contact the editors responsible for this story: Giulia Camillo at gcamillo@bloomberg.net, Ney Hayashi, Danielle Chaves

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