BRASILIA: Brazil’s inflation rate sped up to the fastest in three months in mid-October as cooking gas prices spiked, bolstering expectations that it has finally bottomed out after hitting 18-year lows. The reading should support the central bank’s plan to slow the pace of interest rate cuts next week as the economy emerges from the deepest recession in over 100 years, even though inflation still lags far behind the official target. Consumer prices as measured by the IPCA-15 index rose 2.71 percent in the 12 months through mid-October, data from government statistics agency IBGE showed on Friday, largely in line with the 2.70 percent median estimate in a Reuters poll of economists. A 5.7 percent jump in cooking gas prices accounted for most of the increase after state-controlled oil company Petróleo Brasileiro SA repeatedly hiked prices following weather-related disruptions to global supply. Signs of steadying food prices, which fell at a slower pace than in previous months, would also suggest the rate of price hikes may be accelerating.
A record harvest helped to pull down inflation from double digits early in 2016 at a faster pace than anticipated. Inflation has been hovering below the bottom-end of the official target range, of 4.5 percent plus or minus 1.5 percentage point, since July, with some economists betting it will undershoot the annual goal. Nevertheless, the central bank is widely expected to implement a smaller rate cut than in previous meetings, with expectations that it would reduce them by 75 basis points. With economic activity still subdued and employment gains so far concentrated on off-the-books jobs, policymakers may comfortably take their time in ending monetary easing. Categories which are closely tied to the demand outlook, such as services inflation, remained muted in the mid-October inflation report. The IPCA-15 index rose 0.34 percent from the previous month, close to economist expectations of 0.35 percent, IBGE said.
