UPDATE 2-Brazil monthly inflation at fastest since May 2011

Wed Dec 19, 2012 8:24am EST

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* IPCA-15 index up 0.69 pct in month to mid-Dec
    * 12-month inflation accelerates to 5.78 pct


    By Silvio Cascione
    SAO PAULO, Dec 19 (Reuters) - Inflation in Brazil
accelerated in the month to mid-December to its fastest monthly
rate since May 2011 on higher housing and services prices,
surpassing the central bank's forecasts as it tries to stimulate
economic growth. 
    Brazil's benchmark IPCA inflation rate rose
0.69 percent in the month to mid-December, slightly above
expectations for an increase of 0.66 percent, statistics agency
IBGE said on Wednesday. 
    In the 12 months to mid-December, inflation accelerated to
5.78 percent, up from 5.64 percent one month before. The
government targets inflation at 4.5 percent with a tolerance
margin of 2 percentage points in either direction.
    "The number was not good," said Luis Otavio de Souza Leal,
chief economist at Banco ABC Brasil. "Inflation looks set to
rise anyway you look at it," he said. 
    Faster inflation highlights the challenges facing Brazil's
central bank, which has been cutting interest rates to spur
economic growth but has seen consumer prices above the center of
the government's target for over two years.
    Central bank president Alexandre Tombini has reiterated that
inflation will slow towards the center of the government's
target if interest rates remain stable at their
current level of 7.25 percent, a record low. 
    Tombini's aggressive campaign to lower interest rates, with
ten straight cuts since August 2011, has been part of a broader
effort by President Dilma Rousseff's government to revive growth
in Latin America's largest economy. 
    Brazil, one of the world's fastest growing economies two
years ago, is set to grow less than the United States and even
Japan in 2012, according to economists' forecasts in a weekly
central bank poll. 
    Sticky inflation has challenged the central bank, though. At
the beginning of the year, it forecast consumer prices would
rise 4.7 percent in 2012. Its current estimate for a rise of 5.2
percent will likely be revised up in its quarterly inflation
report, due out on Thursday, analysts said.
    The bank sees 2013 inflation slowing to 4.8 percent, but
analysts expect it to reach 5.4 percent as the economy picks up.
    On Wednesday, the IBGE said prices of personal expenses rose
1.10 percent in the month to mid-December, up from 0.30 percent
in the prior period, as housekeepers' salaries increased 0.82
percent and prices of leisure trips jumped 12.15 percent.
    Housing costs gained 0.74 percent, up from 0.33 percent in
the month to mid-November, on higher electricity rates, rentals
and repair costs.
    Food prices, which helped inflation slow in the previous
month, also accelerated with a rise of 0.97 percent after 0.83
percent in the month to mid-November. Poultry, milk and fruits
were the main drivers of the rise, IBGE said.
    The IPCA-15 index had been expected to rise 0.66 percent in
the month to mid-December, according to the median of 32
forecasts. Estimates ranged from 0.55 percent to 0.72 percent.
    In the month to mid-November, the index rose 0.54 percent.
    Below is the result for each price category:    
    
                                 November  December
                                                   
 - Food and beverages                0.83      0.97
 - Housing                           0.33      0.74
 - Household articles                0.58      0.11
 - Apparel                           1.40      0.62
 - Transport                         0.47      0.71
 - Health and personal care          0.36      0.26
 - Personal expenses                 0.30      1.10
 - Education                         0.04      0.10
 - Communication                     0.30      0.26
                                                   
 - IPCA-15                           0.54      0.69
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