March 11, 2019 / 7:19 PM / 7 months ago

Brazil inflation creeps up, but still in central bank's comfort zone: Reuters poll

BRASILIA (Reuters) - Consumer prices in Brazil likely inched higher in February for the second month in a row, according to a Reuters poll of economists, but still ran comfortably below the central bank’s 2019 inflation target of 4.25 percent.

FILE PHOTO: Customers look at the prices at a supermarket in Rio de Janeiro, Brazil July 28, 2018. REUTERS/Sergio Moraes

The median forecast in a survey of 19 economists points to consumer prices rising at an annual rate of 3.85 percent in February, up from 3.78 percent the month before, the poll shows. Estimates ranged between 3.77 percent and 3.90 percent.

“If our forecast proves right, then 12-month inflation in February ... will still be running below the central bank’s 2019 target,” economists at Citi wrote in a note to clients.

The median estimate from 18 forecasts shows that the monthly rate of increase in consumer prices will be 0.39 percent, up from 0.32 percent in January and the highest since October last year.

The range of these forecasts is 0.31 percent to 0.42 percent.

Economists say seasonal factors pushed the price of foodstuffs higher in February, with tuition fees and other education costs the biggest driver behind the overall rise.

The biggest drag on inflation was transportation costs, which were kept in check by cheaper air travel and fuel, economists say.

If the poll is accurate, it will be the first time since the middle of last year that annual inflation has risen two months in a row and monthly inflation has accelerated three straight months.

However, the magnitude of these increases is small and should present little immediate threat to policymakers’ 4.25 percent inflation target for 2019 or the broad market consensus that interest rates will remain on hold at a record low 6.50 percent for the rest of the year.

New central bank chief Roberto Campos Neto has indicated that monetary policy under his aegis will not deviate from that of his predecessor, Ilan Goldfajn. At his Senate confirmation hearing last month he even repeated the bank’s recent mantra that rate decisions will be based on “caution, serenity and perseverance.”

Recent policy meeting minutes and statements show that rate-setters think inflation risks are moderating, but still believe upside risks are “significant.” The balance of risks in the coming months, therefore, remains “asymmetric” to rising prices, they warn.

Financial markets are more sanguine. Interest rate futures show the central bank’s key Selic rate remaining unchanged at 6.50 percent through January next year. If there is a slight bias, it is to rates being cut.

Reporting by Jamie McGeever; Editing by Steve Orlofsky

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