Brazil: Inflation accelerates to one-year high in October
Latest reading: Inflation jumped to 4.8% in October, which was up from September’s 4.4%. October’s figure was the highest inflation rate in a year and surpassed the upper bound of the Central Bank of Brazil (BCB)’s 1.5–4.5% tolerance band for the first time since December 2023. Looking at the details of the release, housing and utilities prices rose at a quicker pace in October compared to the previous month, and price pressures for food and beverages also picked up pace; the worst drought on record is pressuring electricity and food prices.
Still, the trend was unchanged, with annual average inflation remained at September’s 4.3% in October. Meanwhile, core inflation accelerated to a three-month high of 4.1% in October, up from September’s 3.9%.
Lastly, consumer prices increased a seasonally adjusted 0.56% from the previous month in October, accelerating from the 0.44% rise logged in September. October’s uptick marked the highest reading since February.
Outlook: Our Consensus is for inflation to ease slightly in November–December from current levels, with price pressures over Q4 as a whole averaging near the upper bound of the BCB’s tolerance range. Our panelists see inflation slowly receding further through Q4 2025. A widening interest rate differential against the U.S. should help strengthen the Brazilian real, pushing down the cost of imports. That said, price pressures will remain elevated on the government’s expansionary fiscal policy. The impact of extreme weather events on crops and electricity supply is an upside risk. In addition, our Consensus is for inflation to average above the BCB’s 3.0% target through 2029, despite remaining within its tolerance band.