Some like it hot

BRAZIL ECONOMICS - Report 09 Jun 2025 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

The labor market remains tight, as evidenced by the new drop in the unemployment rate in April, after three quarters of stability. Our estimates suggest that labor market-driven pressures are likely to persist for quite some time.

Even considering the economic slowdown projected by the Central Bank, which we believe is overestimated, our model indicates the unemployment rate would remain close to 7.5% by the end of 2026. In this scenario, since there has not yet been a significant loosening in the labor market, a process that tends to take time, we remain cautious regarding the recent favorable results in core inflation measures, which are likely to remain under pressure.

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