Brazil’s June Inflation Rises More Than Forecast Amid Protests

Brazil’s consumer prices rose more than forecast in the month through mid-June, led by bus prices that have sparked a nationwide protest against corruption, allocation of public funds and the higher cost of living.

Consumer prices as measured by the IPCA-15 price index rose 0.38 percent, the national statistics agency said in a report published on its website today. That was more than the median forecast of 0.36 percent from 29 economists surveyed by Bloomberg. Annual inflation accelerated to 6.67 percent, exceeding the 6.5 percent top of the central bank’s target range, from 6.46 percent in mid-May.

President Dilma Rousseff has attempted to revive growth in the world’s second-biggest emerging market with a series of stimulus measures that this month included subsidized credit for furniture and appliances. Accelerating inflation after six months of record low borrowing costs prompted the central bank in April to shift its focus to combating price increases by raising the benchmark Selic interest rate 0.75 percentage point over two monetary policy meetings.

Swap rates on the contract maturing in January 2014, the most traded in Sao Paulo today, fell two basis points, or 0.02 percentage point, to 9.08 percent at 9:36 a.m. local time. The real weakened 0.3 percent to 2.2643 per U.S. dollar.

Exchange Rate

The real has weakened 10 percent in the past month, the worst performance among the 16 most traded currencies tracked by Bloomberg. The drop in the currency could further fuel inflation by raising the cost of imports.

“The actions of the central bank are meant to consolidate lower inflation and mitigate the effects of the dollar’s strengthening in relation to the real,” bank President Alexandre Tombini told members of Congress in Brasilia on June 18. “A flexible exchange rate regime and the adequate management of monetary policy reduce the possible pass-through of currency depreciation to inflation.”

Annual inflation rose to its highest level since November 2011. Urban bus prices rose 1.83 percent in the month through mid-June, and made the greatest impact on inflation of all components.

Economists in the latest weekly central bank survey forecast 5.83 percent inflation and 2.49 percent economic expansion in 2013, cutting the growth estimate for the fifth straight time. The analysts forecast the benchmark rate at 9 percent at year-end.

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