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Brazilian consumer prices rose above expectations in mid-November, adding to the evidence that inflationary pressures are now spreading despite aggressive rate increases by the central bank.
Annual inflation accelerated to 10.73%, above the average 10.69% estimate in a Bloomberg survey. The national statistics agency reported Thursday that consumer prices rose 1.17% from the previous month.
All nine categories surveyed by the statistics agency saw price increases during the month. The agency said transportation and housing costs, up 2.89% and 1.06% respectively, were the main driver, leading to the biggest mid-month price hike for November in nearly two decades.
“Overall, inflation is now very generalized with compelling evidence of significant second-round effects,” said Alberto Ramos, chief Latin American economist at Goldman Sachs.
Central Bank President Roberto Campos Neto is leading the world’s largest tightening cycle, which has raised interest rates by 575 basis points since March. But global supply chain bottlenecks, soaring commodity prices and President Jair Bolsonaro’s spending plans are complicating efforts to tame inflation. Campos Neto had previously said that increases in consumer prices would peak in September.
Read more: Inflation is raging everywhere, but it’s the worst in Latin America
The pause is short
In recent weeks, policymakers have signaled that a 150 basis point rate hike is on the way in December, although Campos Neto stopped short of repeating that guidance at Wednesday’s event.
On Thursday, some investors braced for a much bigger bullish inflation surprise.
“The inflation number came in slightly above expectations, and should not shift bets for a 150 basis point increase at the upcoming meeting,” said Carlos Menezes, portfolio manager at Gauss Capital Gestora de Rec Ltda. “Yesterday, Campos Neto was pessimistic, and today that opinion is stronger because the inflation number was not high.”
High borrowing costs are now slowing Brazil’s recovery from the pandemic. Economists polled by the central bank this week lowered growth estimates for 2022 to 0.70% from 0.93%. It was the seventh cut in a row.
Analysts also expect consumer prices to end next year at 4.96%. The central bank targets inflation at 3.75% this year and 3.50% in 2022.
(Led paraphrasing, adding details of inflation and an analyst quote that begins in the third paragraph.)
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