Brazil on the rise: what to know in 2026

Energy is the dominant driver

The increase was overwhelmingly driven by energy. Energy prices rose 10.9% on the month, the largest increase since 2005, with gasoline up 21.2%, the largest rise since the series began in 1967. Together, these moves accounted for most of the overall increase. This was a highly concentrated shock rather than a broad-based acceleration in prices.

Outside energy, the release points to limited underlying inflation momentum. Food prices were unchanged on the month, and several core components declined. While some categories such as airfares and apparel increased, others, including medical care and used cars, fell. The picture is one of uneven and moderate price pressures.

That said, the underlying trend remains uncomfortable. Shelter and services inflation have declined since early 2025 but have stabilised at around 3% since late last year. Core inflation, at around 2.5%, has also shown little further progress.

Implications for the Fed

Since the Federal Reserve targets headline personal consumption expenditure (PCE) inflation, which typically runs 0.3 to 0.4 percentage points below CPI, inflation is still likely to be judged as too high. This limits the case for easing.

Two risks to note

Two risks follow from the March data. First, the energy shock could persist or intensify. While energy prices often reverse towards pre-shock levels, the experience of 2021–22 shows that an initial increase can be followed by further rises. This would push inflation higher.

Second, even if energy prices do not increase further, they may remain elevated for some time. In that case, higher oil prices are likely to feed gradually into other components, as firms pass on costs and workers seek compensation, broadening inflation pressures.

The message from the March CPI release is clear. The Federal Reserve is likely to remain on hold, and the bar for rate cuts has risen.