Brazil's government is set to revise up its inflation forecast for this year in projections due later this month, from the 4.5% estimate published in May, the Finance Ministry's economic policy secretary said on Wednesday.
Speaking in an interview with local outlet Jota, Debora Freire said the government is likely to keep its GDP growth forecast unchanged at 2.3% for this year.
On inflationary pressures ahead, Freire said the El Niño weather pattern is a key concern and a driver behind the upward revision, not only in the second half of the year but also into next year, through higher food prices.
"Food inflation is being driven more by climate factors linked to El Niño, as well as structural supply factors related to planting and the cattle cycle," she told Jota.
A recent central bank survey of nearly 100 economists showed El Niño, a phenomenon characterized by warming Pacific Ocean waters and shifting rainfall patterns, is expected to add 30 basis points to Brazilian headline inflation in 2026 and 40 basis points next year.
Freire also noted that fertilizer prices have risen following the shock in oil prices, and, although some components have eased more recently, the impact is expected to push up inflation next year, as higher input costs weigh on the upcoming planting season.