Brazilian economy is facing downside pressure as food price inflation is much higher, currency is depreciating and lower inflation forecast for the 2016. According to the Societe Generale, inflation probably began to moderate in early January. They have estimated mid-month inflation at 10.44% yoy (0.65% mom) as against the previous mid-month value of 10.71% and December's 10.67%. 

In a nut shell, January inflation is expected to fall to 10.0% and inflation should continue to decelerate throughout 2016. While the effect of slow growth and labour market deterioration could lead to a faster-than-expected slowdown in inflation next year.

Currency depreciation remains the most key factor for Brazilian economy as it drives the medium to short term inflation forecasts and major source of upside risks. Above all, it will put direct impact on fiscal condition and keep the inflation considerably above the Central bank's target throughout 2016.