Tags: Brazil | inflation | prices | electricity

Brazil's March Inflation Faster Than Every Economist Estimate

Wednesday, 09 April 2014 11:16 AM

Brazil’s consumer prices rose more in March than economists estimated after the central bank board slowed its pace of interest rate increases.

Inflation as measured by the benchmark IPCA index accelerated to 0.92 percent from 0.69 percent in February, the national statistics agency said today in Rio de Janeiro. That was faster than forecast by all 40 analysts surveyed by Bloomberg, whose median estimate was for an 0.85 percent rise. Annual inflation quickened to 6.15 percent from 5.68 percent, marking its fastest rate since July.

The government’s popularity dropped in two polls posted in the past fortnight as Brazilians express concern that prospects for faster inflation will crimp their purchasing power. Policymakers have responded to consumer price pressures by boosting the benchmark interest rate in every meeting over the past 12 months while signaling that tightening may end this year.

Swap rates on the contract due in January 2015 rose 3 basis points, or 0.03 percentage points, to 11.09 percent at 9:06 a.m. local time.

The biggest factor in the quickening of inflation was food and beverages, which rose 1.92 percent, the statistics agency said in today’s report. Transport prices climbed 1.38 percent.

Central bank President Alexandre Tombini’s nine interest rate increases since April 2013 are the most among the 49 central banks tracked by Bloomberg, with the total tightening of 375 basis points trailing only Turkey among major economies. He halved the pace of increases to 25 basis points in his last two meetings following six straight half-point increases.

Biggest Impact

The biggest impact from raising the Selic has yet to materialize on consumer prices, Tombini said at a Senate hearing last month. The effects of monetary policy on inflation are cumulative and appear with delay, while a jump in fresh food prices may be temporary, he said.

The central bank at the start of the year extended for six months a program to bolster the currency after it depreciated 13 percent in 2013, offering as much as $200 million in foreign exchange swaps auctions daily through at least June 30. The real, which weakened 0.1 percent to 2.203 per U.S. dollar, has appreciated 7.2 percent in 2014.

Analysts polled April 4 by the central bank estimate Brazil’s currency will weaken to 2.45 per dollar by the end of 2014 as inflation reaches 6.35 percent. Policymakers target 4.5 percent inflation, plus or minus 2 percentage points.

Approval Rating

The government’s approval rating fell to 36 percent last week from 41 percent in February as an increasing number of respondents said they expect inflation to accelerate and purchasing power to shrink, according to a survey by public opinion research company Datafolha. The April 2-3 survey of 2,637 people was released April 5 and has a margin of error of plus or minus 2 percentage points.

Prices regulated by the state such as public transport, electricity and fuel rose 3.43 percent in the 12 months through March compared to 3.71 percent in February. Brazilian Vice President Michel Temer said April 7 he sees no room for a fuel price increase before elections in October and that inflation surpassing 6.5 percent would be a “disaster.”

“The government will try to get to the mid-point of the target,” Temer said in New York about inflation. “It will not let it breach the ceiling.”

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Brazil's consumer prices rose more in March than economists estimated after the central bank board slowed its pace of interest rate increases.
Wednesday, 09 April 2014 11:16 AM
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