Brazil Mid-Month Inflation Index Slowed Less Than Expected

Brazil’s mid-month inflation slowed less than economists expected, as the cost of transportation and housing accelerated.

Consumer prices as measured by the IPCA-15 index rose 0.6 percent in the month through March 15, their lowest mid-month reading since September, the national statistics agency said in Rio de Janeiro. Economists expected the index to rise 0.53 percent, according to the median of 32 estimates in a Bloomberg survey. The annual inflation rate accelerated to 6.13 percent from 6.08 percent in mid-February.

Brazilian central bank President Alexandre Tombini said in Senate testimony yesterday that policy makers may adopt new measures to curb the consumer credit growth in a bid to cool heated domestic demand and slow inflation. Tombini said he has “confidence” that interest rate increases, fiscal cuts and curbs on credit will slow inflation to 4.5 percent -- the midpoint of the government’s target range -- next year.

The yield on most interest-rate futures contracts due January 2013, the most traded today in Sao Paulo, fell one basis points, or 0.01 percentage point, to 12.84 percent at 8:09 a.m. New York time. The real fell 0.1 percent to 1.6609 per U.S. dollar.

Housing costs jumped 0.39 percent in the month, compared with 0.28 percent in mid-February. Transportation rose 1.11 percent versus 1.04 percent in the previous mid-month reading. Clothing prices fell 0.37 percent.

Rate Increases

Traders are wagering that the central bank will raise borrowing costs by 0.5 percentage point for a third straight meeting April 20 to cool inflation that is close to the top of the central bank’s target range, according to Bloomberg estimates based on interest rate futures.

Economists raised their 2011 inflation forecast to 5.88 percent, from 5.82 percent a week earlier, according to a March 18 central bank survey of about 100 economists. Economists expect inflation to slow to 4.8 percent in 2012, the survey found.

Brazilian economists estimate that the credit curbs have the same impact on inflation as a 0.75 percentage-point interest rate increase.

Data published last week show Brazil’s economy may be cooling more slowly than analysts had expected. Brazil’s economic activity index rose at its fastest pace in nine months in January.

January retail sales, which Tombini yesterday said are the best reflection of the current state of the economy, beat estimates and rose at their fastest pace in five months. Sales rose 1.2 percent in January from December, up from a revised 0.2 percent the previous month.