Brazil Inflation Cools Before Next Week’s Expected Key Rate Hike

Brazil's inflation rate cooled in September

Brazil's inflation rate slowed in September, official figures showed on Friday, offering some respite ahead of next week's expected key interest rate hike by the central bank.

The consumer price index, a measure of inflation, rose 0.27% in September compared to 0.31% in August, the national statistics agency IBGE said.

The annual inflation rate also decelerated to 7.9% from 8.7% in August, the IBGE said, marking the first time in 2023 that the rate has fallen below 8%.

The slowdown was mainly due to a drop in food prices

The slowdown was mainly due to a drop in food prices, which fell 0.63% in September, the IBGE said.

Food prices have been a major driver of inflation in Brazil in recent months, due to factors such as the war in Ukraine and adverse weather conditions.

The fall in food prices in September was led by a decrease in the price of meat, which fell 2.2%, the IBGE said.

The central bank is expected to raise interest rates next week

Despite the slowdown in inflation, the central bank is expected to raise interest rates by 50 basis points to 13.75% next week.

The central bank has been raising interest rates aggressively in an effort to curb inflation, which is well above the bank's target of 3.5%.

However, the slowdown in inflation in September may give the central bank some room to pause its rate-hiking cycle in the coming months.

Analysts say the central bank will likely continue to raise rates

Analysts say the central bank will likely continue to raise rates until inflation falls back to its target.

However, they say the pace of rate hikes may slow in the coming months as inflation starts to ease.

The central bank is scheduled to announce its next interest rate decision on October 5.