SAO PAULO: Brazil's inflation rate accelerated to a five-month high in mid-November as power costs surged, though it undershot analyst expectations and remained a tad below the official target range.
Consumer prices as measured by the IPCA index rose 2.77 percent in the twelve months through mid-November, data from state statistics agency IBGE showed on Thursday, up from 2.70 percent at the end of October.
An increase in electricity tariffs accounted for half of the uptick as a period of scarce rains hampered hydropower generation, putting regulators on alert.
That helped to lift the official inflation rate further away from 18-year lows seen in August, when an unexpectedly strong agricultural harvest drove the inflation rate below the bottom-end of the government's target range of 4.5 percent plus or minus 1.5 percentage points.
Still, food prices continued to fall in November, keeping the IPCA rate below the median 2.84 percent median forecast in a Reuters poll of economists.
The index rose 0.32 percent from the month before, below expectations of 0.40 percent, IBGE said.
Most economists expect food deflation to ease in coming months, allowing the central bank to meet the year-end target. It has never undershot it in two decades of inflation-targetting.
That is likely to give the central bank wide space to cut interest rates to an all-time low at its next meeting in the first week of December and potentially signal further easing up ahead.
Yields on interest rate future contracts slipped in early trading as traders increased bets on a further rate cut in February 2018.
The central bank has cut the benchmark Selic rate by 675 basis points since October 2016 to support a nascent economic recovery from the deepest recession in a century.
Though economic growth has shown signs of accelerating, economists say that is unlikely to stoke inflation as firms grapple with idle capacity and with employment gains concentrated on off-the-books jobs.
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