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Brazil May Miss CPI Target for First Time in Eight Years as Prices Climb

Brazilian inflation accelerated for a second month through mid-December, led by a jump in food and beverage prices, reinforcing bets that inflation will breach the central bank’s annual target for the first time in 8 years.

Consumer prices, as measured by the IPCA-15 index, rose 0.56 percent in the month, compared with an increase of 0.46 percent in mid-November, the national statistics agency said today. The increase was in line with the median estimate of 43 analysts surveyed by Bloomberg. Annual inflation slowed to 6.56 percent, still above the 6.5 percent upper limit of the central bank’s target range.

“Everything is pointing to having inflation above the target this year,” said Mauricio Nakahodo, senior economist at CM Capital Markets. “To not breach the target depends on the possibility of food prices decelerating quickly.”

President Dilma Rousseff is trying to revive growth in the world’s sixth-biggest economy as Europe’s debt crisis deepens, using a mix of tax cuts, interest rate reductions and looser bank lending requirements. Policy makers have cut the benchmark interest rate three times since August, pushing it to 11 percent, even as inflation ran above its target.

Food and beverage prices advanced 1.28 percent in the month through mid-December, after rising 0.77 percent in the previous period, paced by a 4.36 percent jump in meat prices, the report showed. Clothing prices gained 1.1 percent in the month, compared with 0.87 percent in the previous period.

Analyst Survey

Brazil’s inflation will exceed the upper limit of its target range in 2011 for the first time since 2003, a Dec. 16 central bank survey of about 100 economists showed. A week earlier, the forecast was 6.5 percent.

Central bank President Alexandre Tombini will also fail to meet the bank’s goal of bringing inflation back to the 4.5 percent midpoint of the target next year, the survey shows. Economists forecast inflation to ease to 5.39 percent next year, compared with the previous estimate of 5.42 percent.

Economic growth will quicken in 2012, especially in the second half, fueled by the delayed and cumulative effect of policy makers’ interest rate cuts, Tombini told senators yesterday in Brasilia.

Tombini reiterated that inflation will continue to decelerate in the months ahead and meet the central bank’s 4.5 percent target next year.

The central banker’s comments yesterday may have eased medium-term inflation expectations, said Nakahodo. Traders in the interest rate futures market raised bets for lower borrowing costs, pushing yields for contracts maturing in January 2013 down 6 basis points, or 0.04 percentage point, to 9.82 percent at 10:13 a.m. Brasilia time. The real fell 0.4 percent to 1.8528 per dollar.

Gross domestic product shrank 0.04 percent in the third quarter from the previous three months, the first such contraction since the first quarter of 2009.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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