Brazil Monthly Inflation Accelerates Most Since June

Brazil’s monthly inflation accelerated the most in four months in October on higher fuel and food prices.

Consumer prices, as measured by the benchmark IPCA index, rose 0.28 percent in October from September, the national statistics agency said today. Annual inflation slowed for an eighth month to 4.17 percent from 4.34 percent a month earlier. Economists in Bloomberg surveys expected a monthly inflation rate of 0.23 percent and an annual rate of 4.11 percent.

“The result was worse than expected, but it doesn’t change the overall trend of relatively benign inflation in the short term,” Roberto Padovani, chief strategist at Banco WestLB do Brasil SA, said in a telephone interview from Sao Paulo.

Brazilian policy makers ended seven months of rate cuts in September on signs the country’s economy was recovering faster than expected, with strong domestic demand fueling a rebound in sales and production.

Still, the central bank won’t need to start raising the so- called Selic rate from the current 8.75 percent until April, Padovani said. He expects Brazil to end 2010 with a benchmark rate of 10.25 percent.

Brazil’s government targets inflation of 4.5 percent plus or minus two percentage points.

The yield on the overnight-rate futures contract for January 2011, one of the most-actively traded on the BM&F commodity and futures exchange in Sao Paulo, rose three basis points to 10.18 percent at 9:11 a.m. New York time.

The real gained 0.1 percent to 1.7097 per dollar at 9:38 a.m. New York time from 1.7117 yesterday. Brazil’s benchmark Bovespa index rose 0.9 percent to 66,914.72.

Fuel prices rose 1.74 percent in October from the previous month, with ethanol prices rising 14.64 percent in Sao Paulo, Brazil’s biggest city. Ethanol is mixed with all gasoline sold in Brazil.

Meat prices rose 1.23 percent in October, while sugar prices increased 9.56 percent.

source: bloomberg