Brazil November Consumer Prices Rise 1.01% From Previous Month

  • Annual consumer price increases at fastest pace in 12 years
  • Food and beverages main contributor to last month's rise

Brazil’s consumer prices in November rose more than economists forecast, as President Dilma Rousseff faces impeachment proceedings that hamper attempts to fix the economy.

Consumer prices rose 1.01 percent in November, up from 0.82 percent in October, the national statistics agency said Wednesday. That was above the median 0.95 percent estimate from 40 economists surveyed by Bloomberg, and the fastest pace in eight months. Annual inflation accelerated to 10.48 percent, the quickest in 12 years and more than double the 4.5 percent target.

Inflation running in the double digits has shattered consumer and business confidence and is helping push Brazil into its deepest recession in 25 years. The central bank has signaled it’s ready to resume interest rate increases should policy makers fail to pass fiscal austerity measures, which the government says would tame prices and boost economic growth. With Congress focused on impeachment proceedings, the debate around economic policies has come to a stop.

“The political environment increases our doubts about what the central bank will do, because we know it’s a very complicated scenario,” said Flavio Serrano, senior economist at Haitong in Sao Paulo. “The central bank has increased its hawkish tone, so the chances for hiking process in the beginning of next year have increased considerably.”

Swap rates on the contract due January 2017 fell 1 basis point to 15.77 percent at 5:47 p.m. local time. The real strengthened 1 percent to 3.7582 per U.S. dollar. It has dropped 29 percent this year, the most of all 31 major currencies tracked by Bloomberg.

Food and beverage prices in November rose 1.83 percent, after a 0.77 percent increase in October, the statistics agency said. They were the biggest contributors to last month’s jump in consumer prices, and along with fuel price hikes accounted for two-thirds of the month’s inflation.

The central bank has held rates at 14.25 percent, the highest level since 2006, for three straight meetings as policy makers adopt a wait-and-see stance amid quickening inflation and shrinking gross domestic product. In its November meeting, two of the eight board members dissented in favor of increasing interest rates.

One central banker who voted for a rate hike said Wednesday the risk of doing nothing now is greater than the risk of doing more than enough to control inflation.

“It’s prudent to attack the inflation problem now,” central bank director Tony Volpon said in an interview, adding that he hasn’t decide how he will vote in January’s gathering. "Every meeting is a meeting."

Economists surveyed by the central bank forecast consumer prices will rise 10.44 percent in 2015, and slow to 6.7 percent by the end of 2016. The latter would remain above the ceiling of the central bank’s tolerance band, which ranges from 2.5 percent to 6.5 percent.

“Our commitment -- made by the entire board, not only myself -- is that inflation will begin to fall next year and reach the target by at most the end of 2017,” Volpon said in an interview later Wednesday with Bloomberg Television. "But we’re going to work very hard for inflation to be at target before then."

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