BRAZIL INFLATION UPDATE

SAO PAULO (Reuters) – Inflation in Brazil accelerated in the month to mid-October, driven by rising electricity costs which increased consumer prices in Latin America's largest economy.

Prices, as measured by the IPCA-15 index, rose 0.54% in mid-October, up from 0.13% the previous month, according to government statistics agency IBGE on Thursday.

Economists polled by Reuters had predicted a 0.50% rise.

In the 12 months leading to mid-October, inflation reached 4.47%, rising from 4.12% previously and higher than the 4.43% forecasted by economists.

The primary contributor to inflation this month was residential electricity prices, which surged 5.29%. Additionally, food prices rose 0.87% on a monthly basis.

Electricity costs were already influencing inflation in Brazil during September due to a severe drought, which raises the likelihood of further interest rate hikes by the central bank.

The monetary authority's rate-setting committee, known as Copom, commenced a cycle of interest rate hikes last month, implementing a 25 basis point increase and suggesting more tightening is on the horizon.

According to Kimberley Sperrfechter, an emerging markets economist at Capital Economics, comments from policymakers at Banco Central do Brasil (BCB) about persistent services inflation and unstable inflation expectations suggest that an increase in the pace of rate hikes from 25 bp to 50 bp is becoming increasingly probable.