Brazil's IPCA-15 consumer price index rose 6.58 percent in the 12 months through mid-December, edging closer to the 6.5 percent ceiling of the government's target.
The figures fostered speculation that the central bank could cut rates by 75 basis points at its January meeting, after pursuing two 25 basis points reductions since October.
Rate future prices, however, suggested most traders still were betting on a 50 basis point cut.
The country's real currency strengthened 0.4 percent, in line with other Latin American currencies.
The Chilean peso rose more than its peers after prices of copper, the country's main export, climbed further away from a one-month low.
Trading volumes have been thin in year-end trading as many investors avoid big bets ahead of the Christmas holiday.