Brazil Inflation Picks Up in Mid-October with Higher Electricity Costs

• Inflation in Brazil accelerated in the month to mid-October, as higher electricity costs pushed consumer prices up in Latin America's largest economy.
• Prices as measured by the IPCA-15 index rose 0.54% in the month to mid-October, up from 0.13% in the previous month, government statistics agency IBGE (Institute of Geography and Statistics) said on Thursday, October 25. Economists polled by Reuters were expecting a 0.50% rise. In the 12 months to mid-October, inflation stood at 4.47%, up from the 4.12% seen the month before and above the 4.43% forecast by economists.
• The main impact on inflation in the month to mid-October came from residential electricity prices, which rose 5.29%. Food prices also picked up, with a 0.87% increase on a monthly basis. This comes after electricity costs pushed inflation higher in September amid a major drought, reinforcing expectations of further interest rate hikes by the country's central bank.
• The monetary authority's rate-setting committee, known as Copom, kicked off an interest rate-hiking cycle last month with a 25-basis point increase and signalled more tightening ahead. "With comments from BCB (Banco Central do Brasil) policymakers warning about strong services inflation and unanchored inflation expectations, a step up in the pace of rate hikes from 25 bp to 50 bp is looking increasingly likely," said Kimberley Sperrfechter, emerging markets economist at Capital Economics.

(Source: Reuters)