Brazil inflation slows, backs up central bank view

SAO PAULO: Inflation in Brazil slowed slightly in the month to mid-October as expected, reinforcing the central bank's argument that consumer prices will cool off even as it cuts interest rates to offset the effects of a global slowdown.

Brazil's benchmark IPCA-15 inflation index rose 0.42 percent in the month to mid-October, slowing from the previous month, statistics agency IBGE said on Thursday.

The index had been expected to increase 0.44 percent in the month to mid-October, according to the median forecast of 18 economists surveyed by Reuters.

The data follow a central bank interest rate cut to 11.50 percent from 12 percent late on Wednesday, as policymakers see a worsening global outlook and a sharp slowdown in domestic activity cooling inflationary pressures.

Still, consumer prices rose 7.12 percent in the 12 months through mid-October, well above the 6.5 percent ceiling of the central bank's annual inflation target. 12-month inflation pulled back from 7.33 percent a month ago, helped in part by price data from a year earlier.

Central bank chief Alexandre Tombini has said that he expected inflation to ease after peaking in September as activity at home and abroad cools.

Analysts remain skeptical, however, that the central bank will curb inflation to 4.5 percent, the midpoint of its target range, even by the end of 2012.

Copyright Reuters, 2011