MercoPress. South Atlantic News Agency

Brazilean consumer prices increase 0.56% in January, fastest in nine months

Central bank chief Tombini insists inflation will be brought back into target

Brazilian consumer prices rose at the fastest pace in nine months in January on higher transport, food and drink costs. Prices increased 0.56% from December, the national statistics agency said in a report distributed in Rio de Janeiro.

Central bank President Alexandre Tombini said in Mumbai last week that policy makers are working to bring inflation back to 4.5% this year, even as the bank’s own forecast shows consumer prices will rise 4.7% in 2012.

Traders are betting the central bank will cut its benchmark rate by 0.5 percentage point for a fifth straight meeting in March, to 10% and to 9.25% by July. Economists forecast inflation of 5.29% this year, according to a Feb. 3 central bank survey, down from 6.5% in 2011.

Transport costs rose 0.69% in January after stagnating in December. Food and beverage prices showed the largest increase, with a gain of 0.86% compared with a 1.23% increase the month earlier.

Recent data show the economy rebounding after it contracted in the third quarter for the first time in more than two years. The central bank’s economic activity index, a proxy for GDP, expanded at its fastest pace in 19 months in November, while unemployment fell to a record low of 4.7% in December and industrial production rose at the quickest pace in seven months.

The January inflation number marked the first time the statistics agency used a new methodology that changes the weighting of each category of goods and services in the overall index. Using the old methodology the January rate would have been higher, according to local market analysts.