BRASILIA: Annual inflation in Brazil probably increased to nearly 6 percent in the month through mid-March as hot, dry weather pushed up food prices, a Reuters poll showed on Tuesday.
The IPCA-15 price index likely rose 5.90 percent in the 12-month period through mid-March, up from 5.65 percent a month before, according to the median of 19 forecasts.
Higher food costs are adding to several other price pressures that are nudging inflation toward the ceiling of the central bank's target range, paving the way for further interest rate hikes despite fragile economic growth.
Although policymakers see the increase in food prices as temporary, the central bank will probably act to make sure the surge does not have any lasting effects on inflation, the bank's president, Alexandre Tombini, said on Tuesday.
Brazil's central bank targets inflation at 4.5 percent, plus or minus two percentage points. It has jacked up interest rates by 350 basis points since April last year to 10.75 percent , and is widely expected to raise borrowing costs at least once more, in early April.
Naggingly high inflation has hampered business and consumer confidence, posing a major challenge to President Dilma Rousseff's bid for re-election in October.
On a monthly basis, inflation as measured by the IPCA-15 index likely rose 0.73 percent, up from 0.70 percent in mid-February, the median of 25 forecasts showed.
Wholesale price measures are already showing higher food costs due to a drought in most of southern Brazil in early February, but the impact on the benchmark consumer price index had been limited so far.
Itau Unibanco economists forecast an increase of 1.3 percent in the index for "food at home" over mid-February, as well as a sharp increase in airfares and fuel prices.
Hot weather also lowered water levels in reservoirs at key hydrolectric dams, raising the threat of water and energy rationing and potentially increasing electricity costs, especially next year.
Gasoline prices are also expected to increase this year and next, and low unemployment is likely to continue fueling services inflation, economists say.
Brazil's inflation rate is expected to end this year at 6.11 percent, according to a weekly central bank poll.
Forecasts for the monthly rate ranged from 0.60 to 0.81 percent, while estimates for the annual rate ranged from 5.76 to 5.99 percent in the Reuters poll.
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