Brazil Prices Rose More Than Expected This Month

Brazil’s mid-month inflation rate jumped more than economists expected, increasing pressure on the central bank to quicken the pace of interest rate increases at its next meeting. Yields on interest-rate futures rose.

Consumer prices, as measured by the benchmark IPCA-15 index, rose 0.76 percent in the month through mid-January, pushing the annual rate to 6.04 percent, the national statistics agency said today on its website. The monthly gain was more than the median 0.69 percent increase forecast in a Bloomberg survey of 33 analysts.

Traders are wagering policy makers may accelerate the pace of interest rate increases when they meet in March to fight the fastest annual inflation in 25 months, interest rate futures show. Yields on the seven most-traded contracts rose today.

“Traders are already putting pressure on the central bank to quicken the pace of increases,” Roberto Padovani, chief economist at Banco WestLB do Brasil SA, said in a phone interview from Sao Paulo. “Today’s figure reinforces those bets.”

Yields on interest rate futures maturing in January 2012 rose 4 basis points to 12.46 percent at 7:53 a.m. New York time. The real strengthened 0.2 percent to 1.6680 per U.S. dollar.

Higher Selic

Policy makers, meeting last week for the first time under the leadership of bank President Alexandre Tombini, increased the benchmark interest rate to 11.25 percent from 10.75 percent. The bank, in a statement, said higher borrowing costs coupled with macro prudential measures to slow credit growth will help bring inflation back to its 4.5 percent target. It was the first rate increase since July.

The central bank may increase the Selic rate by as much as 0.75 percentage point in March and push it to as high as 13.25 percent by year end, Bloomberg estimates based on interest rate futures show.

WestLB’s Padovani forecasts the central bank will raise interest rates by 150 basis points to 12.25 percent before pausing.

Inflation will ease in the second quarter, because seasonal food price increases account for the bulk of price increases, Padovani said. He forecasts inflation will slow to 5 percent by year end.

A 1.21 percent jump in food and beverage prices accounted for 37 percent of the monthly increase, the statistics agency said. Food prices had risen 1.84 percent in the previous survey period.

Transportation costs jumped 0.89 percent in the month, up from 0.17 percent in the mid-December period.

Annual inflation will quicken this year to 6.5 percent, touching the upper end of the government’s target range, Paulo Leme, chief Latin American economist at Goldman Sachs Group Inc., said yesterday in a conference in New York.

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