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Brazil Inflation October 2023

Brazil: Inflation decreases in October

Inflation came in at 4.8% in October, down from September’s 5.2%. October’s print undershot market expectations; nevertheless, it remained well above the 3.25% target of the Central Bank of Brazil (BCB) for 2023. Looking at the details of the release, the moderation chiefly reflected prices for transportation rising at a softer pace in October. The rate of increase in prices for food and beverages, as well as clothing, also slowed during the month.

Accordingly, the trend pointed down, with annual average inflation falling to 4.8% in October (September: 4.9%). Core inflation also cooled, slowing to a 27-month low of 5.6% (September: 6.0%).

Finally, consumer prices increased by a seasonally adjusted 0.24% in October over the previous month, broadly unchanged from the 0.26% increase seen in September.

Following October’s inflation downtick, the BCB will likely deliver another 50 basis point cut to its benchmark SELIC rate when it next convenes on 12–13 December, continuing on its announced monetary policy path. In the coming quarters, inflation is expected to average below its current level, but the decrease will be limited by a more challenging base effect and lower interest rates supporting activity. A stronger-than-anticipated El Niño and higher-than-expected oil prices pose upside risks.

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