Brazil Inflation Hits Target Ceiling Amid Presidential Runoff

Brazil's annual inflation rate rose to 4.58% in September, reaching the ceiling of the central bank's target range. Data from the Brazilian Institute of Geography and Statistics showed a monthly increase of 0.82%, reversing a decline seen in August. The spike resulted primarily from a 7.42% surge in residential electricity costs following the expiration of a hydroelectric credit from the Itaipu plant, alongside rising costs for transport, food, and beverages.

Luiz Inácio Lula da Silva faces a presidential runoff against Senator Flávio Bolsonaro in 16 days, with the opposition using the inflation data to highlight cost-of-living concerns. Despite the price increase, the Ibovespa index climbed 0.94% as investors characterized the energy shock as a technical issue rather than a structural economic threat.

Market participants maintain expectations for another interest rate cut during the November 3–4 meeting. The benchmark Selic rate currently stands at 13.75% following five consecutive reductions by the central bank.