Brazil inflation remains above goal despite softer-than-expected October reading
TLT•Brazil's annual inflation rose to 4.63% in October from 4.58% in September, below economists' 4.73% forecast but above the central bank's target range. Monthly inflation slowed to 0.14% from 0.82%.
1. Annual inflation rises
Annual inflation reached 4.63% in October, up from 4.58% in September and below economists' 4.73% forecast. Consumer prices rose 0.14% month over month, slowing from 0.82% in September and below the 0.25% forecast.
2. Prices and interest rates
Food and beverage prices rose 1.04% in October, while transport costs fell 0.59% and housing costs fell 0.51%. The central bank's target is 3%, plus or minus 1.5 percentage points. Last week it held its benchmark Selic rate at 13.75%, pausing an easing cycle launched in March.
3. Outlook and policy
Capital Economics economist William Jackson said a return to monetary easing requires inflation to resume a downward trend, which he said will probably occur from March, as well as fiscal reform to reduce risk premia. Lula's reelection last month has fueled a weakening of the real while pushing long-term interest rates and inflation forecasts higher.
