Consumer prices, as measured by the benchmark IPCA price index, jumped 0.78 percent in February, compared with 0.75 percent gain in the previous month, the national statistics agency said in a report distributed in Rio de Janeiro today. The gain was less than the median 0.81 percent forecast in a Bloomberg survey of 34 analysts.
“The rebound in economic growth and rising consumer demand create the necessary environment for price increases,” said Andre Perfeito, an economist who helps manage 3 billion reais ($1.7 billion) at Gradual Investimentos in Sao Paulo. “These factors set up the stage for an interest rate rise at the next central bank meeting.”
Inflationary pressures are increasing as economic growth quickens in Latin America’s biggest economy. Traders are betting the central bank will increase the benchmark interest rate, at a record-low 8.75 percent since July, as early as this month to keep a lid on inflation, Bloomberg estimates based on rate futures show.
Though today’s data was below expectations, it reinforced the view that inflation dynamics have worsened in recent months, according to Flavio Serrano, senior economist at Banco Espirito Santo de Investimento.
The yield on interest rate futures contracts due in January 2011, the most traded on the Sao Paulo stock exchange, fell 5 basis points to 10.43 percent at 8:31 a.m. New York time as the inflation data was lower than traders expected. The real strengthened 0.21 percent to 1.7847 per U.S. dollar.
Food and beverage prices as well as tuition fees had the biggest gains, rising 0.96 percent and 4.53 percent in the month respectively, the statistics agency said. Annual inflation accelerated to 4.83 percent, exceeding the 4.5 percent target for a second straight month.
Brazil’s $1.6 trillion economy will expand 5.5 percent this year, according to a survey of 100 analysts published March 1 by the central bank.
Industrial output rebounded in January after contracting for two consecutive months, adding to evidence the economy is expanding at a fast pace. Output in January rose 1.1 percent from December, a statistics agency report published yesterday showed.
Meirelles on Feb. 26 said he won’t avoid taking unpopular steps to keep inflation in line with the central bank’s target. His comments came after the bank withdrew some of the stimulus measures adopted during the global credit crisis and raised by 71 billion reais ($39 billion) the amount banks will have to deposit at the central bank.
