Brazil Broadest Inflation Index Accelerates Faster Than Expected

Brazil’s broadest measure of price increases accelerated to the fastest pace in 13 months as the central bank is set to buck the international trend by raising borrowing costs for the fifth straight time.

Wholesale, consumer and construction prices, as measured by the IGP-M index, rose 1.17 percent this month, the Getulio Vargas Foundation, an education and research institution based in Rio de Janeiro, said on its website. That was more than the median 1.11 percent forecast from 28 economists surveyed by Bloomberg. The index, which is weighted 60 percent in wholesale prices, rose 3.55 percent in the past 12 months.

Inflation in Latin America’s largest economy remains above target and is eating into wages, pummeling consumer confidence. A rebound of the real since March, easing inflation pressures, won’t be enough to keep the central bank from raising the benchmark borrowing rate by an half percentage point, according to economists surveyed by Bloomberg.

Producer prices rose 1.41 percent in the month after rising 0.92 percent in March, the FGV said on its website. Consumer prices as measured by the index increased 0.75 percent, from 1.42 percent the prior month.

Central bank directors conclude their two-day monetary policy meeting Wednesday. With inflation nearly two percentage points above the ceiling of the target range, policy makers will keep the pace of their tightening cycle by boosting the benchmark Selic by another 50 basis points, according to 53 of 61 economists surveyed by Bloomberg.

Inflation as measured by the statistics agency’s IPCA-15 index accelerated to 8.22 percent in the 12 months through mid-April. The central bank targets inflation of 4.5 percent, plus or minus two percentage points.

Consumer confidence registered an uptick this month after price increases drove sentiment in March to its lowest in nearly a decade, according to the FGV. Brazil’s real has strengthened 8.8 percent in April after falling 17 percent in the first three months of the year, the most of all emerging markets tracked by Bloomberg.

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