BRASILIA (Reuters) - Brazil's consumer prices rose less than expected in the month to mid-December, government statistics agency IBGE said on Friday, an outcome insufficient, however, to lead economists to foresee a better outlook for inflation.
Annual inflation reached 4.71% in mid-December, exceeding the target of 3% set with a tolerance range of 1.5 percentage points, or up to 4.5%. Economists polled by Reuters had expected it to hit 4.82%.
The consumer price index climbed 0.34% in the month to mid-December, down from 0.62% in the previous period and below the 0.45% increase forecast in the Reuters poll.
XP (NASDAQ:XP) economist Alexandre Maluf attributed the considerably lower-than-expected monthly reading to a bearish surprise in airfares, but noted it "does not change our view that the inflation outlook remains quite challenging."
"All key indicators sensitive to monetary policy are well above the 3% target," he said, predicting that industrial goods prices will accelerate in the coming quarters, reflecting the significant weakening of Brazil's currency amid fiscal woes.
According to IBGE, food and beverage prices posted the biggest increase both on a monthly and annual basis, driving the largest impact on the overall consumer price increase. On the other hand, housing costs decreased month-on-month.
The figures come after the central bank accelerated the pace of monetary tightening earlier this month, delivering a 100 basis-point hike that lifted interest rates to 12.25% and signaling matching increases at its next two meetings.
Policymakers stressed that the current environment, marked by market expectations and their own inflation projections surpassing the target, combined with a stronger-than-expected economy, requires a more contractionary monetary policy.