Brazil’s annual inflation rate in September breached the target ceiling on higher electricity prices, adding to the financial strain on voters as they prepare to choose their next president on Oct. 25.
Official data released Friday showed consumer prices accelerated 4.58% from a year earlier, above the 4.5% median estimate from analysts in a Bloomberg survey. On the month, inflation hit 0.82%. The central bank targets inflation at 3%, with a tolerance band of 1.5 percentage points in either direction.
Flávio Bolsonaro upset President Luiz Inácio Lula da Silva in last Sunday’s first-round vote, making him the strong favorite to win the runoff later this month. Frustration with the rising cost of living and turmoil surrounding the Supreme Court helped fuel anti-establishment sentiment and gave the right-wing challenger an edge.
Read more: Bolsonaro Leads Lula in Brazil Runoff After First Round Surprise ·
What Bloomberg Economics Says
“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.”
— Adriana Dupita, Brazil economist
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Brazilian markets soared this week on the prospect that Bolsonaro, the son of former President Jair Bolsonaro, would win the race and rein in public spending.
All nine groups of goods and services tracked by the statistics agency became more expensive in September. Housing costs drove the gains, climbing 2.31% on a jump in electricity prices after the expiration of a utility credit.
While the central bank has been cutting the benchmark Selic rate — now at 13.75% — investor fears that Brazil’s fiscal position would continue to deteriorate under Lula have added to inflation pressures.