Brazil’s New Central Bank Chief Faces Immediate Inflation Test

Brazil’s inflation challenge persisted through the end of 2024, with annual prices rising 4.83%, breaching the central bank’s 4.5% tolerance ceiling. While December showed a modest monthly increase of 0.52%, the underlying data reveals persistent inflationary pressures across most sectors. New central bank chief Gabriel Galipolo faces immediate challenges, as a combination of robust economic growth, fiscal uncertainties, and currency weakness threatens price stability. Despite some relief from lower housing costs, broad-based price increases in food, transportation, and services suggest mounting inflationary pressures. The situation has prompted plans for aggressive monetary tightening, with interest rates expected to reach 14.25% by March, though investors remain skeptical about the government’s fiscal consolidation efforts.