October 20, 2017 / 12:07 PM / 9 months ago

UPDATE 1-Brazil inflation reaches 3-mth high as cooking gas prices spike

 (Updates throughout with additional information, context)
    By Bruno Federowski
    BRASILIA, Oct 20 (Reuters) - Brazil's inflation rate sped up
to the fastest in three months in mid-October as cooking gas
prices spiked, bolstering expectations that it has finally
bottomed out after hitting 18-year lows.
    The reading should support the central bank's plan to slow
the pace of interest rate cuts next week as the economy emerges
from the deepest recession in over 100 years, even though
inflation still lags far behind the official target.
    Consumer prices as measured by the IPCA-15 index rose 2.71
percent in the 12 months through mid-October, data from
government statistics agency IBGE showed on Friday, largely in
line with the 2.70 percent median estimate in a Reuters poll of
    A 5.7 percent jump in cooking gas prices accounted for most
of the increase after state-controlled oil company Petróleo
Brasileiro SA            repeatedly hiked prices following
weather-related disruptions to global supply.
    Signs of steadying food prices, which fell at a slower pace
than in previous months, would also suggest the rate of price
hikes may be accelerating. A record harvest helped to pull down
inflation from double digits early in 2016 at a faster pace than
    Inflation has been hovering below the bottom-end of the
official target range, of 4.5 percent plus or minus 1.5
percentage point, since July, with some economists betting it
will undershoot the annual goal.
    Nevertheless, the central bank is widely expected to
implement a smaller rate cut than in previous meetings, with
expectations that it would reduce them by 75 basis points. 
    With economic activity still subdued and employment gains so
far concentrated on off-the-books jobs, policymakers may
comfortably take their time in ending monetary easing.
Categories which are closely tied to the demand outlook, such as
services inflation, remained muted in the mid-October inflation
    The IPCA-15 index rose 0.34 percent from the previous month,
close to economist expectations of 0.35 percent, IBGE said.

 (Reporting by Bruno Federowski; Editing by Chizu Nomiyama)
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