By Gabriel Burin
(Reuters) – Brazil’s inflation likely stayed high in March on rising gasoline bills, reigniting cost of living problems in the country’s stagnant economy and probably stoking more disagreement over policy, a Reuters poll showed.
Consumer prices cooled in the second half of 2022 in reaction to an aggressive tightening campaign by the central bank. But inflation pressures reemerged after President Luiz Inacio Lula da Silva took office at the start of this year.
The monthly report on consumer prices scheduled for Tuesday could again push back expectations for policy easing towards the end of this year and reinforce Lula’s view the Bank’s hawkish approach is proving ineffective.
The benchmark consumer price index IPCA increased 0.77% in March, according to the median estimate of 13 economists polled March 29-April 3. This would stand very close to the 0.84% rate in February, which had been the quickest in 10 months.
“Food inflation should remain at low levels for this time of the year… (but) the partial resumption of federal taxes on gasoline and ethanol on March 1 will take a toll in the March IPCA,” Morgan Stanley (NYSE:) analysts wrote in a report.
The reinstatement of taxes on fuels already tinged March mid-month inflation figures, which came in higher than forecast, dampening any expectations Banco Central do Brasil may begin to cut its benchmark rate, currently at 13.75%, in the short term.
The 12-month reading for last month is seen at 4.70%, under 5.60% in February and the lowest in more than two years due to base effects. Brazil’s IBGE statistics agency will publish the data on Tuesday at 0900 local time (1200 GMT).
A 0.77% inflation rate in March would result in a cumulative 2.2% clip in the first quarter, well on course to surpass this year’s goal of 3.25% with a margin of 1.5 percentage points.
Last week Lula hinted the government may seek changes in the target to allow for rate cuts sooner, an idea central bank governor Roberto Campos Neto – a member of a committee that sets the goal – has rejected.
The panel is comprised by the bank’s chief and the ministers of finance and planning, who think the fuel tax and other revenue-boosting planned measures will help lower inflation by eventually closing the primary deficit.
(Reporting and polling by Gabriel Burin; Editing by Jan Harvey)
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