BRASILIA, March 13 (Reuters) – Brazil’s Finance Ministry slightly raised its inflation forecast for this year after factoring in an average oil price now expected to be 10.8% higher than previously estimated due to the U.S.-Israeli conflict with Iran.
The projections were released ahead of the central bank’s monetary policy meeting next week, as intense oil price volatility and its potential impact on inflation cloud market bets on whether policymakers will begin an anticipated easing cycle with a 25- or 50-basis-point interest rate cut.
The ministry now sees inflation in 2026 at 3.7%, up from 3.6% previously. It kept its forecast for economic growth unchanged at 2.3%.
The projections consider that the oil shock will be temporary, with Brent crude prices averaging $73.10 per barrel this year.
“This scenario assumes an easing of the conflicts in the coming days and the possibility of repairing, still in the short term, the damage already observed at energy and logistics facilities,” the ministry said in a report.
It also considers the release of strategic oil reserves and higher output from producers outside the affected region, it added.
REVENUE BOOST
Oil is the main export of Latin America’s largest economy, and the government said higher prices tend to boost Brazil’s net exports and economic growth, with spillovers to federal revenue.
It projected an additional 21.4 billion reais ($4.09 billion) in federal government revenue, even under the milder-impact scenario.
The ministry also outlined two more disruptive scenarios for oil prices this year.
If average Brent prices hit $82 per barrel, inflation would increase by 0.33 percentage points, versus 0.14 points in the baseline scenario. If it climbs to $100 per barrel, inflation would rise by 0.58 percentage points.
Brazil’s government on Thursday scrapped taxes on diesel while imposing a levy on oil exports in a bid to soften the blow of the recent spike in global oil prices, but the measures were not factored into Friday’s projections.
($1 = 5.2321 reais)
(Reporting by Marcela Ayres; Editing by Gabriel Araujo)
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