PREVIEW-Brazil inflation seen at 0.79 pct in January

WHAT: Brazil's January IPCA consumer price index

WHEN: Tuesday, Feb. 8, at 9 a.m. (1100 GMT)

REUTERS FORECAST

Brazil's benchmark IPCA consumer price index BRCPI=ECI is
expected to soar 0.79 percent in January after rising 0.63
percent in December, according to the median view of 12
analysts surveyed by Reuters. Forecasts ranged from 0.75
percent to 0.87 percent.

FACTORS TO WATCH

Analysts will look to see whether the data confirms rising
price pressures in Latin America's largest economy, after
12-month inflation pushed above 6 percent in the month to
mid-January.

Inflation in January was likely led by rents and bus fares,
which is typical for the start of the year.

Soaring prices of ethanol, a biofuel that powers many of
Brazil's cars, should also contribute, said Marcelo Carvalho,
chief of economy research at BNP Paribas for Latin America. It
is cane interharvest in Brazil.

A change in school costs should have a more substantial
impact only in February, Carvalho added.

Twelve-month inflation reached 5.91 percent in 2010, at the
top end of a government target range. The government aims for
4.5 percent inflation, with a tolerance band of 2 percentage
points.

MARKET IMPACT

A stronger-than-expected number could increase the pressure
on Brazil's central bank to increase borrowing costs from 11.25
percent currently.

The central bank resumed monetary tightening in January and
analysts in a weekly central bank survey released earlier this
week expected the Selic rate [BRCBMP=ECI] -- the central bank's
benchmark overnight interest rate -- to reach 12.50 percent by
the end of this year.

The central bank, however, has made clear that it could use
alternative monetary tools to rein in price pressures and hopes
fiscal adjustments, likely to be announced next week, will take
away some of the stimulus that is driving inflation.

It is feared that further hikes in Brazil's borrowing costs
could attract even more capital to a country already struggling
with one of the world's most overvalued currencies.
(Reporting by Vanessa Stelzer; Writing by Inae Riveras and Ana
Nicolaci da Costa; Editing by Leslie Adler)