Brazil’s rate of annualized inflation reached 6.75 percent in September, breaching the upper ceiling of the inflation target, the official of national statistics said Wednesday.
The IBGE said the Consumer Price Index accelerated from 0.25 percent to 0.57 percent from August to September, boosted by rising food prices, and was higher than expected.
Inflation had been hovering around the upper limit in recent months, and had begun to fall. Now at 6.75 percent, the rate is well above the target set by the central bank of 4.5 percent with a tolerance band of plus or minus two points. It’s now at its fastest since October 2011, when it reached 6.97 percent.
Eulina Nunes dos Santos, inflation index coordinator at the IBGE, described the “considerable” rise in the index as a “significant acceleration” from previous months, and that increases in food prices would mean less well-off families starting to feel the pinch.
“Groceries are bought almost every day or every week (and) people are more aware of the rise in these products. Particularly those on lower incomes, who typically spend more of their budget on food,” Santos was quoted by the Folha de S.Paulo newspaper.
Rises in the price of meat, driven by ongoing drought conditions in chief cattle rearing areas, have pushed prices the most.
The latest market estimate, according to the central bank, is for annual inflation to reach 6.32 percent this year.
Folha says experts believe the central bank has "given up" aiming for the central 4.5 percent target, for fear of rising interest rates and a slowdown in consumer spending, particularly among the lower socioeconomic classes.
With the economy at the core of the current election season, the inflation results are yet another blow to President Dilma Rousseff's bid for re-election, and ammunition to those backing her opponent in the Oct. 26 runoff, pro-business Social Democracy candidate Aécio Neves.
Neves has been openly supported by the markets, who see Rousseff's fiscal policy as overly interventionist.
Both candidates have vowed to return the economy to growth, with Neves pledging to slash government spending by halving the number of ministries and boosting investor confidence.
In an olive branch to the markets, Rousseff signaled that she will remove Finance Minister Guido Mantega if re-elected, but has yet to say who would replace him and has been clear that she will not put poverty-reducing social programs at risk by implementing harsh fiscal adjustments.
The inflation news comes a day after the International Monetary Fund slashed its 2014 outlook for economic output in Brazil to 0.3 percent. The government responded by calling the forecast "pessimistic" and maintains the economy will grow by 0.9 percent this year.
Ratings agencies have also piled on the pressure. Standard & Poor's cut its Brazil sovereign debt rating to one notch above speculative territory earlier this year, and last month Moody's revised down its outlook on Brazil's Baa2 rating from stable to negative, threatening to downgrade the country if it fails to adopt policies capable of lifting the economy out of the 1-2 percent meduim-term growth range.
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