Reuters: US Dollar Report: WRAPUP 1-Brazil inflation defies easing trend in Latin America

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WRAPUP 1-Brazil inflation defies easing trend in Latin America Dec 7th 2012, 17:01 Fri Dec 7, 2012 12:01pm EST * Inflation eases in November in Mexico, Chile, Colombia and Peru * Brazil inflation jump highlights risks of lower rates * Economists see monetary policy on steady path MEXICO CITY, Dec 6 (Reuters) - Inflation in Brazil jumped unexpectedly in November, defying a regional trend towards lower price pressures as the impact of a mid-year food price spike fades. Inflation in Latin America's biggest economy picked up to 5.53 percent last month, compared with a rise of 5.45 percent in the 12 months through October and expectations for a slight dip. The jump in Brazil highlights the risks its central bank faces in trying to shore up disappointingly slow growth. It targets inflation of 4.5 percent, with a 2 percentage point tolerance zone on each side, and has already slashed benchmark credit costs to a record low 7.25 percent. Data on Friday showed annual inflation eased in Mexico and Chile, matching declines recorded earlier for Colombia and Peru and lessening pressure on those countries' central banks. "Pretty much across the board you've seen food (prices) knock quite a chunk off inflation, particularly in the Andean countries," said Capital Markets economist Michael Henderson. "The other central banks don't have the problem of slowing growth that Brazil has had .... so they are toeing the line between a pretty healthy inflation picture and fairly steady growth." Economists generally see steady interest rates in the short term in major Latin American economies, with inflation either within the central banks' target ranges or headed that way. Brazil's 0.6 percent month-on-month rise in consumer prices was driven by increases in prices of transportation as well as electricity, which was also a factor in Mexico as seasonal summer power subsidies were removed. In Mexico, a drop in fresh food prices trimmed annual inflation to a lower-than-expected 4.18 percent, from 4.6 percent in October and on track to meet the central bank's forecast of a fall below its 4 percent ceiling by year-end. The fall bolstered expectations the Banco de Mexico will keep interest rates on hold at 4.5 percent, after it threatened hikes to rein in inflation which peaked at a 2-1/2 year high in September. Chile inflation eased to 2.1 from 2.9 percent in October after a surprise 0.5 percent fall in prices during the month, the steepest monthly decline in three years and well below the central bank's 3 percent target. Chile has kept rates at 5 percent since January and Finance Minister Felipe Larrain said the drop in inflation "allows for more tranquility in terms of monetary policy." Colombian inflation eased to 2.77 percent in November, from 3.06 percent in October, below analysts' expectations and below the midpoint of the central bank's annual inflation target range of 2 percent to 4 percent. At its last monetary policy meeting, Colombia's central bank unexpectedly cut its benchmark interest rate a quarter point to 4.5 percent given an expected slowdown in the economy as global risks weigh on the nation's manufacturing and exports. In Peru, inflation in metropolitan Lima in the 12 months through November eased to 2.66 percent, inside the central bank's 1 percent to 3 percent target range and from 3.25 percent in October. Peru has kept benchmark interest rates unchanged at 4.25 percent for more than a year. Link this Share this Digg this Email Reprints

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