(Adds economists' comments)
SAO PAULO, Feb 24 (Reuters) - Brazil's consumer prices
rose by more than expected in the month to mid-February, data
from government statistics agency IBGE showed on Friday, with
annual inflation remaining well above target after speculation
that the goal could be boosted.
The country's IPCA-15 consumer price index rose
0.76% in the month to mid-February, up from 0.55% in the
previous month, while economists polled by Reuters had forecast
a 0.72% increase.
Annual inflation reached 5.63%, down from 5.87% a month
earlier but also above the 5.6% forecast by economists, with
interest rate cuts still seen as unlikely in the very short
term.
The latest data follows a clash between President Luiz
Inacio Lula da Silva and central bank governor Roberto Campos
Neto over high interest rates, when speculation of a potential
government move to boost inflation targets emerged.
Lula's criticism of the central bank led to a deterioration
of inflation expectations and a steepening of the yield curve.
Brazil has an inflation target of 3.25% this year and 3% in 2024
and 2025, in all cases with a 1.5-point tolerance band.
Campos Neto defended the central bank's autonomy to pursue
targets by hiking rates, currently at a six-year high of 13.75%,
while Lula has said lending costs were far too high given the
inflation trajectory, hindering economic growth.
Andres Abadia, Pantheon Macroeconomics' chief Latin America
economist, said that under "normal circumstances" the recent
fall in annual inflation would trigger a dovish shift by the
central bank, but that noise stemming from Lula's remarks was
still a threat.
"Unfortunately, uncertainties about the government's
commitment to low inflation, including the autonomy of the
central bank, have raised red flags," Abadia said in a note to
clients.
Brazil's top economic policy council earlier this month
decided to put off the discussion by announcing no new
resolutions regarding its inflation targets, but it may still
review the targets at any time.
Some of the country's top hedge fund managers have recently
dubbed the inflation goals "unrealistic" and "too ambitious" to
be met, calling for an upward change.
Under current targets, Friday's inflation data will not ease
policymakers' concerns about the strength of core inflation,
Capital Economics' chief emerging markets economist William
Jackson said.
Prices in eight of the nine groups surveyed rose in
February, with education posting the largest impact. Only
apparel costs fell in the period.
"We continue to think that Copom will only turn to monetary
easing towards the end of the year, delivering 100bp of cuts (to
12.75%)," Jackson said - a view shared by private economists
polled by the central bank.
(Reporting by Gabriel Araujo; Editing by Chizu Nomiyama and
Louise Heavens)
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