Inflation moderated more than expected in October

Summary

Inflation eased to 6.59% YoY (0.42% MoM) in October, from 6.75% YoY (0.57% MoM) in September. The decline was sharper than expected (BBVA: 6.67% YoY/0.50% MoM; consensus: 6.65% YoY/0.48% MoM), but inflation remains above the 6.5% YoY target ceiling. As the 3% increase in the gasoline price announced yesterday was smaller than expected and taking into account the positive surprise in October's inflation, we maintain our view that inflation will close the year within the target range (more precisely at 6.2% YoY). This supports our forecast that the SELIC will continue being adjusted at a 25bp rather than at a 50bp pace.

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