A woman looks at the shelves with meat in Carrefour supermarket in Sao Paulo, Brazil November 27, 2024. REUTERS/Amanda Perobelli/File Photo

SAO PAULO -Brazil's inflation slowed more than expected in October, following a rebound in September, data from statistics agency IBGE showed on Tuesday, fueling expectations of an interest rate cut early next year.

Consumer prices in Latin America's largest economy rose 0.09% in October, down from a 0.48% increase the previous month, as residential electricity prices fell, IBGE said. Economists at a Reuters poll expected a 0.16% expansion.

Over the 12 months through October, prices rose 4.68%, also decelerating from 5.17% the previous month, and below the 4.75% increase expected by in the poll.

Brazil's central bank, which targets a 3% inflation plus or minus a margin of 1.5 percentage points, kept the benchmark Selic rate steady last week for the third straight time at a near 20-year high.

Capital Economics analysts said in a note that the larger-than-expected fall in inflation, together with pronounced signs of economic weakness, could prompt the central bank to cut interest rates in January, while ruling out the possibility of a December cut.

In the minutes of its latest monetary policy decision released earlier on Tuesday, the central bank said that the recent economic developments have reinforced its view that the current 15% rate is adequate to bring inflation back to target.

"The minutes to last week's meeting, while less hawkish than those from the preceding meeting, gave no sign that a cut is imminent," Capital Economics' analysts added.

Daycoval analysts said that the October data does not alter their expectation that interest rates will remain unchanged through the end of the year.

(Reporting by Isabel Teles; Editing by Aida Pelaez-Fernandez)