Brazil’s inflation ends 2024 above goal, setting stage for extra price hikes

SAO PAULO (Reuters) – Brazil’s annual inflation got here in barely under market forecasts in December however nonetheless ended 2024 above the higher restrict of the central financial institution’s goal vary, with policymakers tightening financial coverage as they vow to deliver costs again to their purpose.

In Latin America’s largest-economy, 12-month inflation closed final yr at 4.83%, statistics company IBGE mentioned on Friday, under each the 4.88% anticipated by economists polled by Reuters and the earlier month determine of 4.87%.

Regardless of the modest easing within the headline information, economists imagine the determine won’t stop the native central financial institution from urgent forward with rate of interest hikes.

The financial institution had beforehand mentioned inflation was all however sure to finish 2024 above its 1.5% to 4.5% goal vary, a stage it expects to stay in place till the third quarter earlier than a decline begins.

Policymakers on the financial institution have confronted a difficult situation marked by sturdy exercise, a decent labor market and unanchored inflation expectations regardless of projections of a extra aggressive price path by this yr.

They unanimously voted to speed up their tightening tempo with a 100 basis-point hike final month, bringing rates of interest to 12.25%, and signaled matching strikes for the following two conferences as they search to succeed in the official 3% inflation goal.

“There’s little on this IPCA launch that may stop (curiosity rate-setting committee) Copom following by with its steering at its assembly in December,” Capital Economics’ deputy chief rising markets economist Jason Tuvey mentioned.

In December alone, IBGE information confirmed, client costs as measured by the benchmark IPCA index rose 0.52%, barely under the 0.57% improve anticipated within the Reuters ballot however accelerating from the earlier month’s 0.39% rise.

The month-to-month determine was pushed by larger meals and beverage prices, which rose 1.18% within the interval. Transportation and clothes costs have been additionally up, the statistics company mentioned, whereas housing prices dropped.

“It is a comparatively optimistic finish to the yr, nevertheless it affords little consolation because the inflation outlook has deteriorated considerably,” Pantheon Macroeconomics’ chief Latin America economist Andres Abadia mentioned.

“Main indicators and unfavorable inertia counsel inflation will stay uncomfortably excessive within the coming months, compelling the Copom to proceed tightening charges.”