WRAPUP 2-Brazil inflation defies easing trend in Latin America

Fri Dec 7, 2012 1:21pm EST

* Mexico, Chile, Colombia, Peru see inflation ease in Nov.
    * Rousseff says Brazil inflation "under control"
    * Economists see monetary policy in region on steady path


    MEXICO CITY/BRASILIA, Dec 7 (Reuters) - Inflation in Brazil
accelerated unexpectedly in November, defying a regional trend
toward lower price pressures as the impact of a mid-year food
price spike fades.
    Inflation in Brazil, Latin America's biggest economy, picked
up to 5.53 percent in the 12 months through November, topping
forecasts for a slight dip and up from a 5.45 percent rate in
the 12 months through October.
    The jump highlights the risks Brazil's central bank faces in
trying to shore up disappointingly slow growth. It targets
inflation of 4.5 percent, with a 2 percentage point tolerance
zone on each side, and has already slashed benchmark credit
costs to a record low 7.25 percent. 
    Mexico and Chile on Friday both reported that annual
inflation rates had eased, matching declines recorded earlier
for Colombia and Peru and lessening pressure on those countries'
central banks.    
    "Pretty much across the board you've seen food knock quite a
chunk off inflation, particularly in the Andean countries," said
Capital Markets economist Michael Henderson.
    "The other central banks don't have the problem of slowing
growth that Brazil has had .... so they are toeing the line
between a pretty healthy inflation picture and fairly steady
growth."
    Brazil's president, Dilma Rousseff, downplayed concerns
about inflation, saying prices are under control. She also told
journalists she had no intention of firing Finance Minister
Guido Mantega, who has been heavily criticized after aggressive
government intervention failed to spur faster growth in the
world's sixth-largest economy.
 
    Economists generally see steady interest rates in the short
term in major Latin American economies, with inflation either
within the central banks' target ranges or headed that way.
    Brazil's 0.6 percent month-on-month rise in consumer prices
was driven by increases in the cost of transportation as well as
electricity, which was also a factor in Mexico as seasonal
summer power subsidies were removed.
    In Mexico, a drop in fresh food prices trimmed annual
inflation to a lower-than-expected 4.18 percent, from 4.6
percent in October and on track to meet the central bank's
forecast of a fall below its 4 percent ceiling by year-end.
    The decline bolstered expectations that the central bank,
Banco de Mexico, will keep interest rates on hold at 4.5
percent, after it threatened hikes to rein in inflation, which
peaked at a 2-1/2-year high in September. 
    In Chile, inflation eased to 2.1 percent in the 12 months
through November, after a surprise 0.5 percent fall in prices
during the month, the steepest monthly decline in three years
and well below the central bank's 3 percent target. Inflation in
the 12 months through October was 2.9 percent. 
    Chile has kept interest rates at 5 percent since January,
and Finance Minister Felipe Larrain said the drop in inflation
"allows for more tranquility in terms of monetary policy."
    Colombian inflation eased to 2.77 percent in November, from
3.06 percent in October, below analysts' expectations and below
the midpoint of the central bank's annual inflation target range
of 2 percent to 4 percent. 
    At its last monetary policy meeting, Colombia's central bank
unexpectedly cut its benchmark interest rate a quarter point to
4.5 percent given an expected slowdown in the economy as global
risks weigh on the nation's manufacturing and exports. 
    In Peru, inflation in metropolitan Lima in the 12 months
through November eased to 2.66 percent, inside the central
bank's 1 percent to 3 percent target range and from 3.25 percent
in October. Peru has kept benchmark interest rates unchanged at
4.25 percent for more than a year.
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