Brazil inflation could rise above 6%

The rise in Brazilian inflation last month is particularly worrying since it came despite a moderation in food inflation. With plans to cut electricity tariffs now under threat from a drought that has hit hydro-electricity production, there is a real possibility that inflation could rise to over 6% in the coming months. This is unlikely to provoke policy tightening, but at the same time it will prevent further easing that would otherwise help the economic recovery.