If your electric bill felt steeper, the data backs you up. Year-over-year inflation reached 4.58% in September, beating the 4.5% median projection from Bloomberg's poll, while monthly prices advanced 0.82%. The central bank aims for 3% inflation, allowing a 1.5 percentage point band on either side, and September's reading pushed above that ceiling.
Every one of the nine groups tracked by the statistics agency got pricier in September. Housing costs did the heavy lifting, up 2.31%, after a utility credit expired and electricity charges rose.
Investor concern that Brazil's public finances would keep worsening under Luiz Inácio Lula da Silva has also been cited as stoking price pressures. "The September consumer price report shows inflation back above target earlier than we expected, with underlying measures reversing improvement over recent months. That's bad news for the central bank, but won't prevent another small rate cut in November, provided the currency holds its post-election strength," said Adriana Dupita, Brazil economist.
Inflation above target forces a central bank's hand eventually. Market Briefs covers Latin American policy free every weekday.
Timing matters here: the presidential runoff is set for Oct. 25. In last Sunday's first round, Flávio Bolsonaro defeated President Luiz Inácio Lula da Silva, making him the clear favorite heading into the rematch later this month. Discontent over living costs and turmoil around the Supreme Court fed anti-establishment sentiment and boosted the right-wing challenger.
This week, a wave of bets that Flávio Bolsonaro - Jair Bolsonaro's son - would triumph and trim government outlays pushed Brazilian assets higher.
Policymakers have been lowering the benchmark Selic rate, which stands at 13.75%. Bloomberg Economics' take suggests the latest inflation surprise is a headache for the central bank, but not a deal-breaker for a small cut in November if the currency holds up.
For your money, the setup is straightforward to watch: stubborn power costs, election momentum, and a still-elevated Selic will shape prices and sentiment as Oct. 25 approaches.
Power bills are doing a lot of work in this particular print. Join Market Briefs free and follow the data.
