Brazil Inflation Shoots Through Target Limit Before Runoff Vote

Brazil’s annual inflation rate shot through the target ceiling in early October, adding to voters’ frustrations as they prepare to pick their next president on Sunday.

Official data released Friday showed that consumer prices gained 4.62% from a year earlier, below the 4.74% median estimate of analysts surveyed by Bloomberg. On the month, inflation reached 0.32%. The central bank targets inflation at 3%, with a tolerance band of 1.5 percentage points in either direction.

Flávio Bolsonaro upset President Luiz Inácio Lula da Silva in the Oct. 4 first-round vote, making him the strong favorite to win the runoff. Economic angst as well as a major bank fraud scandal engulfing the Supreme Court have stirred anti-system sentiment and helped amplify the right-wing challenger’s message.

But the race has tightened in its final weeks, with polls pointing to a dead heat. Lula’s supporters staged massive street rallies while the Senate approved a measure to abolish Brazil’s six-day workweek — one of the president’s signature campaign proposals — providing the incumbent late momentum.

Read more: Bolsonaro and Lula Tied Ahead of Brazil Runoff, Poll Shows

Brazilian assets have rallied on the prospect of a Bolsonaro victory, with investors seeing the 45-year-old senator and son of former President Jair Bolsonaro as more likely to rein in spending.

While the central bank has been cutting the benchmark Selic rate — now at 13.75% — investor fears that Brazil’s fiscal position would worsen under Lula have added to inflation pressures.