Brazil recorded a faster pace of consumer price growth in March as transportation costs, and gasoline in particular, pushed both the monthly and 12-month inflation readings higher, official data showed on Friday.
Statistics agency IBGE reported that annual inflation, measured over the last 12 months, climbed to 4.14% in March from 3.81% in February. That result exceeded the median expectation of economists surveyed by Reuters, who had forecast a 4.00% annual rate.
On a monthly basis the IPCA consumer price index rose 0.88% in March, above the 0.77% increase that had been projected. IBGE highlighted transportation and food and beverage prices as the main contributors to the surprise in the monthly figure.
Within transportation, gasoline stood out as the principal upward driver. IBGE data showed gasoline prices increased 4.59% in March, the largest gain among transportation components.
IBGE research manager Fernando Gonçalves said that international geopolitical uncertainty was already having an impact on prices, with fuel costs particularly affected.
Last month Brazil's central bank initiated a long-anticipated easing cycle with a 25 basis point cut to its policy rate. The bank, however, refrained from giving explicit forward guidance on subsequent moves in the face of risks that an oil price shock tied to tensions in the Middle East could pose.
Despite the elevated readings and external uncertainties, economists polled and commentators in the market continue to expect further reductions in interest rates.
"(The) overall picture corroborates our expectation of a continued pace of interest rate cuts of 0.25 p.p. at the next meeting," Daycoval economist Julio Barros said in a statement.
At the same time, other analysts have signaled that the end point for policy - the terminal rate - may now be higher than previously anticipated. Pantheon Macroeconomics' chief Latin America economist Andres Abadia noted that while cuts have started, the terminal interest rate appears elevated.
The March inflation numbers underline immediate pressures on transportation and energy-related costs, and present another data point for policymakers weighing the path of monetary easing against risks from international developments.
Key developments:
- 12-month inflation rose to 4.14% in March from 3.81% in February, versus a 4.00% Reuters consensus.
- Monthly IPCA increased 0.88%, above the 0.77% forecast, with transportation and food and beverages as main contributors.
- Gasoline prices jumped 4.59% in March, the largest increase within the transportation category.