Brazil’s consumer prices probably went up in September, mainly due to higher gasoline prices. This could result in the highest annual inflation rate in seven months, according to a survey of economists by Reuters.
Although it’s anticipated that inflation will slow down, there are concerns that it might rise again due to the possible effects of the El Niño weather pattern on agricultural production. So far this year, agricultural output has been plentiful, but El Niño could change that.
The inflation index called IPCA, which is set to be released on Wednesday, likely increased by 0.34% last month compared to August. In yearly terms, it’s expected to be at 5.27%, the highest rate since February. This information comes from a survey of 26 economists conducted from October 4th to 9th.
Yan Barros, an economist at Ace Capital, mentioned that “Prices of industrial goods stayed fairly low, and services remained at acceptable levels… the overall increase in prices was likely driven by higher gasoline costs.”
The Brazilian government-owned company Petrobras has been adjusting fuel prices in line with changes in global oil markets in recent weeks. They’ve also mentioned that the ongoing conflict in Israel could lead to more unpredictable price fluctuations.
Another cause for worry is El Niño, a phenomenon where the Pacific Ocean’s water temperatures rise, often resulting in extreme weather events. This is a concern because it’s already affecting crops in places like Australia, India, and other countries.
According to Sicredi analysts, it seems like inflation reached its highest point in September and might start going down afterward. However, if the effects of El Niño turn out to be significant, we might start feeling its impact in 2024.
The combination of higher oil prices, concerns about the weather, Brazil’s financial problems, and rising U.S. interest rates has been keeping inflation expectations somewhat higher than what’s considered ideal, slightly above the government’s target.
The consensus forecast for this year, according to the central bank’s recent survey of private economists, stands at 4.86%. This could potentially exceed the official goal for 2023, which is 3.25%, with a margin of 1.5 percentage points on either side.
The head of Brazil’s central bank’s monetary policy division mentioned that the recent violence in the Middle East is making the global situation more complicated. However, he also emphasized that policymakers remain dedicated to reducing interest rates.
The Banco Central do Brasil plans to continue with gradual interest rate reductions. They are keeping a close eye on any signs of inflation picking up again, especially given the uncertainties for 2024, even though the country has had a surprisingly strong economic performance this year.
