Reuters: US Dollar Report: WRAPUP 1-Brazil inflation slows more than expected

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WRAPUP 1-Brazil inflation slows more than expected Mar 22nd 2012, 13:19 Thu Mar 22, 2012 9:19am EDT * Consumer prices rose 0.25 pct in the month to mid-March * But jobless rate at record low for Feb, 5.7 pct * Yields on rate futures fall on softer inflation outlook By Silvio Cascione SAO PAULO, March 22 (Reuters) - Inflation in Brazil slowed much more than expected in the month to mid-March, reinforcing the central bank's case for aggressive interest rate cuts to stimulate the economy after it nearly fell into recession in the second half of 2011. But the lowest unemployment rate for February on record signalled the relief in inflation may be short-lived, as services costs may rise even faster than overall inflation as the economy reacts later this year to the heavy stimulus. Brazil's benchmark IPCA-15 inflation index rose 0.25 percent in the month to mid-March, government statistics agency IBGE said on Thursday. "No one expected such a low inflation rate," said Mauricio Nakahodo, chief economist at CM Capital Markets, in São Paulo. "That could lead to downward revisions to annual inflation forecasts," The index had been expected to rise 0.38 percent in the month to mid-March, according to the median forecast of 17 economists surveyed by Reuters. Estimates for the IPCA-15 increase ranged from 0.32 percent to 0.43 percent. In the month to mid-February, the index rose 0.53 percent. Inflation in the 12-month period through mid-March eased to 5.61 percent from 5.98 percent in the previous reading. B razil's central bank targets inflation of 4.5 percent annually, with a leeway of plus or minus 2 percentage points. The bank has said 12-month consumer inflation will likely end this year close to the center of the target, opening the door for aggressive monetary stimulus as President Dilma Rousseff tries to revive Latin America's top economy after disappointing growth in 2011. Last week, the bank said it is very likely to slash interest rates in coming months to "slightly above" the 8.75-percent all-time low. The next rate decision is on April 18, and most analysts expect the central bank to slash rates to 9 percent from 9.75 percent, according to a central bank survey. Yields on interest rate futures fell after the data to reflect a softer inflation outlook. JOB MARKET STILL TIGHT Brazil's jobless rate rose to 5.7 percent in February but still marked a historic low for the month, the government's statistics agency IBGE said on Thursday. The rate had been expected to rise to 5.9 percent from a previously reported 5.5 percent in January, according to the median forecast of 19 economists surveyed by Reuters. The estimates ranged from 5.7 percent to 6.2 percent. February's jobless number was the lowest rate for the month since unemployment data series began in 2002, a sign that the Brazilian labor market stayed largely unaffected by the economic slowdown in the second half of 2011. In February 2011, Brazil posted a 6.4 percent unemployment rate. "Considering the seasonal adjustments the indicator registered 5.5 percent - in other words, it continues basically in the lowest level of the total historical series," said Fernanda Consorte, economist at Santander Brasil. "The February survey has confirmed our call that the labor market remains heated, which may provide room to accelerate the GDP pace growth in coming quarters, especially service sector." Personal expenditures rose 0.60 percent in the month to mid-March, after a 1.07-percent jump in the previous release. Food costs inched up 0.22 percent, from an increase of 0.29 percent in the previous month. Transportation prices like gasoline and bus fares rose 0.11 percent, after falling 0.05 percent in the month to mid-February. Education costs eased after a seasonal jump in tuition at the start of the school year last month. They rose only 0.51 percent in the month to mid-March, after jumping 5.66 percent in the previous reading, IBGE said. Real wages, or salaries discounted for inflation, rose 1.2 percent from January to 1,699.70 reais ($931) and increased 4.4 percent from a year earlier. Years of solid job creation helped turn Brazil into the world's sixth largest economy in 2011, ensuring President Dilma Rousseff's high popular support and underpinning a jump in home prices in recent years. The jobless rate hit a record low of 4.7 percent in December. and Link this Share this Digg this Email Reprints

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