Bank of America points out risks for inflation with El Niño and end of the 6×1 scale

BofA (Bank of America) revised its projection for Brazilian inflation in 2027, from 4.1% to 4.7%. The expectation for this year was maintained at 5.5%.

However, the bank's estimates still do not incorporate two risks cited as relevant by David Beker, head of Economics in Brazil and Strategy for Latin America at BofA.

The first of these is El Niño, a phenomenon characterized by the atypical warming of the Pacific Ocean which, consequently, changes the climate and meteorological conditions in the region.

Alerts have sounded throughout the American continent for a "super" El Niño this year. And the phenomenon has already shown signs in the month of June, according to a bulletin released by Inmet (National Institute of Meteorology) on Monday (29).

In the worst case scenario, BofA projects an upward impact of up to 1.8 percentage points on inflation from El Niño.

In the market, Beker points out that agribusiness shares are already beginning to register readjustments under the impact of the phenomenon.

El Niño raises alarm for investors with exposure to agriculture | MONEY REVIEW

The second risk pointed out by the economist is the PEC (Proposed Amendment to the Constitution) which proposes the reduction of working hours and the end of the 6×1 scale.

"It will drive inflation up", says Beker, pointing out that the bank drafts hypotheses and projections about the impact, but highlighting that it is difficult to put a number on it due to the diversity of the economy and the impact on the different sectors that make it up.

Source: CNN