Brazilian consumer price inflation bounced back to seven-month highs

Brazilian consumer price inflation bounced back to seven-month highs in November from ultra-low levels the month before, led by the rising cost of meat and regulated prices like electricity, official figures showed on Friday.

Although the annual rate of inflation posted one of its biggest increases from the previous month seen in years, it remains well below the central bank’s target and is unlikely to prevent another cut in interest rates next week.

The benchmark IPCA index of inflation rose 0.51% from the previous month, government statistics agency IBGE said, the highest month-on-month increase since April and above the median estimate in a Reuters poll of 0.46%.

The rise of 0.41 percentage points from October’s 0.10% monthly inflation rate was the biggest in over a year.

The year-on-year rate of IPCA price inflation in November was 3.27%, up from 2.54% in October. That jump of 0.73 percentage points was the biggest since June last year, and the second biggest in 15 years, Refinitiv data show.

The median forecasts in a Reuters poll of economists was for an annual inflation rate of 3.23%.

“The rise in inflation was a bit more than had been expected ... (but) I don’t see anything that will stop Copom from cutting interest rates next week,” said William Jackson, economist at Capital Economics.

“But this, alongside a strengthening economy, certainly means that will be the last cut in the cycle,” he said.

The central bank’s official year-end inflation goals are 4.25% for 2019 and 4.00% for 2020. Most economists think they will be undershot.

In the first 11 months of the year, the annual rate of inflation was running at 3.12%, IBGE said.

The central bank is widely expected to cut its benchmark Selic interest rate next week by half a percentage point to a record low of 4.50%. That would be the fourth consecutive reduction of 50 basis points.

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