Inflation in early September came in at 4.47% compared with the same month a year earlier, topping the Bloomberg survey median of 4.32%. The monthly increase was 0.70%, and that print also beat all estimates in the Bloomberg survey. The timing matters because Brazil's presidential election is set for Oct. 4.
The ballot is effectively tied between Luiz Inácio Lula da Silva and Flávio Bolsonaro, and rising costs are part of the campaign fight. The government tried several steps to ease household strain from higher oil prices and a weakening economy, and last week Lula expanded payouts under the administration's main social assistance program to try to regain momentum. Bolsonaro has criticized Lula over rising food prices, and Lula's public standing has been weakened by a crisis involving the Supreme Court.
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The central bank has been cutting interest rates and reduced the benchmark Selic rate to 13.75% last week, but policymakers have stayed cautious on further easing because annual inflation remains above their 3% objective. The CPI target is 3% and the top of the target range is 4.5% as of Jan.'24. Investors should note these facts when weighing interest-rate sensitive parts of your portfolio.
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