Rising Inflation Weakens Brazilian President’s Re-election Hopes

Inflation in Brazil surged to a record high in March, leaving little or no room for the central bank to cut interest rates to stoke growth in Latin America’s biggest economy. Analysts say rising inflation could also jeopardize President Dilma Rousseff’s chances of re-election.

In the 12 months through March, consumer prices rose 6.15%, inching closer to the central bank’s target ceiling of 6.5%, while food prices increased 1.92% from February, according to Reuters.

According to reports in the local press, the price of vegetables such as tomatoes and potatoes increased more than 30% in March from February. Irregular rainfall in most parts of the country caused vegetable prices to spike sharply, making inflation a political hot potato in the country going to polls in October.

Rising fuel prices, which seem to be the primary cause of the sudden rise in consumer prices, are particularly hurting President Dilma’s re-election hopes and threatening to damage her popularity rating. Inflation is a particularly sensitive issue in Brazil, where hyperinflation held back growth for years in 1980s and 1990s.

Analysts say inflation is unlikely to remain below the central bank’s target ceiling of 6.5%, meaning it will continue to put pressure on the government. Rising salaries in the labor market have also increased services prices  from 8.18% to 9.09% in February.

However, some analysts have expressed optimism that vegetable prices may drop in the weeks to come. Rousseff is still the favorite to win the presidential election, but if inflation continues to rise it could yet undermine her bid.