Brazil's January inflation rises, supporting a cautious interest rate cut outlook

LootboxPhobia · 2026-02-11T09:36:05+00:00

Brazil's January inflation rose 4.44% year-on-year, exceeding expectations and reinforcing the central bank's cautious rate cut outlook. Market opinions on the size of the rate cut vary, mainly influenced by rising transportation and fuel prices. The central bank governor stated that interest rates will be adjusted cautiously.

LootboxPhobia

2026-02-11 09:36:05

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Investing.com – Brazil’s January inflation accelerates, reinforcing market expectations that the central bank will proceed cautiously when beginning to cut interest rates.

According to data released by the National Statistics Institute on Tuesday, consumer prices rose 4.44% year-over-year, slightly above the median forecast of 4.43%. On a monthly basis, prices increased 0.33% compared to December.

Despite the rise in inflation, policymakers led by Central Bank President Gabriel Galipolo have indicated that the expected rate-cutting cycle will begin in March. Market expectations for the first rate cut remain divided, with forecasts ranging between 25 basis points and 50 basis points.

Galipolo reinforced the rationale for a more moderate approach on Monday, stating that given inflation expectations above target and economic resilience, policymakers will proceed cautiously in adjusting interest rates. These comments have increased market bets on a small rate cut next month.

Among the nine major categories, transportation contributed the most to January inflation, rising 0.60%. This increase was mainly driven by a 2.14% rise in fuel prices. Gasoline prices increased 2.06%, contributing 0.10 percentage points to the overall inflation data for the month.

Prices for other fuel types also increased, with ethanol up 3.44%, diesel up 0.52%, and natural gas for vehicles up 0.20%.

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