Inflation in Brazil surges as severe drought bites country

BRASILIA

Inflation in Brazil climbed to 4.42 percent year-on-year in September as a severe drought in Latin America's biggest economy caused food and fuel prices to soar, official figures have shown.

The monthly increase of 0.44 percent in the consumer price index is the biggest for the month of September in three years, the Brazilian Institute of Geography and Statistics (IBGE) said.

In August, monthly inflation had fallen for the first time since June 2023, dipping by 0.02 percent, and year-on-year inflation had slowed to 4.24 percent.

The IBGE attributed the price rises in September to a surge in household electricity prices (+5.36 percent) and food prices (+0.5 percent), both linked to the worst drought in Brazil since records began in 1950.

BGE research director Andre Almeida said the low level of water in hydropower plants was the "main reason" for the electricity tariff hikes.

He added that the drought has also affected meat supply and led to longer intervals between harvests, affecting food prices.

Environmentalists have linked the drought, which has fueled the worst wildfire season in Brazil in years, to climate change.

At 4.42 percent Brazil's inflation rate is close to the upper limit of 4.5 percent targeted by the country's central bank.

The bank last month cited the stubbornly high inflation rate for its decision to raise its benchmark lending rate to 10.75 percent, its first rate hike in two years.