Inflation in Brazil rises more than expected due to food

(Bloomberg) — Brazil’s consumer prices rose more than expected on food and transportation costs after the central bank signaled it’s likely to raise interest rates again next month.

Prices rose 12.13% in April from a year earlier, above the median estimate of 12.06% in a Bloomberg survey. Monthly inflation reached 1.06%, the national statistics agency reported on Wednesday.

The central bank is nearing the end of one of the world’s most aggressive monetary tightening cycles since the pandemic, with hikes adding 10.75 percentage points to the Selic rate in just over a year. However, inflation remains stuck in double digits, irritating Brazilians and presenting a major challenge to President Jair Bolsonaro’s efforts to win a second term.

Last week, policymakers led by Roberto Campos Neto raised the key rate to 12.75%, signaling that a further, albeit smaller, increase was likely before ending the cycle of hikes. In the minutes of the rate decision, the central bankers wrote that the effects of higher borrowing costs on inflation «remain to be seen.»

Commodity prices continue to rise due to the Russian invasion of Ukraine, which has repercussions throughout the Brazilian economy. State oil company Petróleo Brasileiro SA raised diesel prices by 8.9% this week.

The rising cost of living has become a top concern for voters ahead of October’s general election, with polls widely showing Bolsonaro bearing the blame.

While Campos Neto has previously said inflation should peak in April, major Wall Street banks now see inflation of more than 9% by the end of the year, well above the 2022 target of 3.5%.

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Brazil’s Consumer Prices Rise More Than Forecast on Food Costs

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