Brazil mid-January inflation highest in five years as food rises again

BRASILIA: Brazil's IPCA-15 consumer price index rose 0.78% in the month to mid-January, the statistics agency IBGE said on Tuesday, the highest January reading for five years as food prices continued to boost overall inflation.

The annual rate of inflation in mid-January ticked up to 4.30%, above the central bank's year-end target for consumer price inflation of 3.75%.

The median forecasts in a Reuters poll of economists were 0.81% and 4.33%, respectively.

Prices rose in almost every sector, but once again the main driver was food and drink, as the spike fueled by tight supply and a weak exchange rate extended into another month.

Eight of the nine sectors covered in the survey showed rising prices, IBGE said.

Food prices rose 1.53% on the month, accounting for around a third of the overall rise, IBGE said, noting however, that this marked a deceleration form December's 2.00% increase.

Central bank policymakers said last week that they still see the rise in food prices as a temporary phenomenon, but admitted that it has lasted longer than they had expected.

A weekly central bank survey of economists published on Monday showed the average 2021 inflation forecast rising to 3.50% from 3.40% and the average year-end interest rate outlook rising to 3.50% from 3.25%.

Housing costs rose 1.44% in the month, accounting for almost a quarter of the overall increase in prices, IBGE said. Transport costs, including fuel, rose 1.43%.

The 4.3% annual rate is above the central bank's 2021 inflation goal of 3.75%. The central bank last week left interest rates unchanged at a record low 2.00%, but ditched its forward guidance not to raise them for a long time because long-term inflation forecasts are close enough to target.