In September, Brazil's Consumer Price Index (IPCA) recorded a 0.44% increase, marking a significant rise in inflation compared to August. This rise was mainly driven by soaring electricity costs caused by drought, and although it was slightly below the market expectation of 0.46%, it still reflects the economic pressures the country is facing. Inflation for the 12 months ending in September reached 4.42%, slightly under economists' estimates of 4.43%.
More than half of Brazil's electricity relies on hydroelectric supply, and the ongoing drought has exacerbated the increase in electricity costs. In September, residential electricity prices surged by 5.36%, becoming a major factor in driving inflation. Nevertheless, Finance Minister Fernando Haddad stated that the government is closely monitoring core inflation, excluding the volatility of energy and food prices, and overall inflation remains under control.
Brazil is currently facing severe climate challenges, which have not only driven up electricity costs but also put economic pressure on other basic services. The government is taking measures to address these challenges, attempting to balance between controlling inflation and promoting economic growth.
