Brazil inflation likely slowed slightly in November

SAO PAULO Wed Dec 5, 2012 11:44pm IST

SAO PAULO (Reuters) - Inflation in Brazil probably softened slightly in November as slowing food price increases partially offset higher apparel prices, leaving authorities free to focus on stimulating economic growth, a Reuters poll of economists showed on Wednesday.

Brazil's benchmark IPCA consumer price index likely gained 0.50 percent in November, slightly down from an increase of 0.59 percent in October, according to the median forecast of 35 banks and research firms surveyed by Reuters.

The economists surveyed see prices rising 5.44 percent in the 12 months through November, according to the median of 22 estimates, nearly unchanged from 5.45 percent in October. The government targets inflation at 4.5 percent, with a tolerance margin of 2 percentage points in either direction.

A price index for Sao Paulo, Brazil's largest city, showed a sharp deceleration in food costs in November from October after most of the impact of a severe drought in the United States earlier this year was absorbed. The IPC-Fipe index slowed to a rise of 0.68 percent from 0.80 percent in October.

Apparel prices have increased sharply, though, as the holiday shopping season picks up steam.

"The preliminary IPCA benchmark index showed the fastest rise in clothing prices for the month of November in recent years," Votorantim analysts led by Leonardo Sapienza wrote in a research note.

The inflation figures to be released on Friday at 9 a.m. (1100 GMT) will likely have little impact on the outlook for interest rates, as analysts and traders see the central bank tolerating inflation above the center of the target in order to stimulate economic growth.

The bank, led by Alexandre Tombini, cut its benchmark Selic rate to a record low of 7.25 percent amid aggressive efforts by President Dilma Rousseff to revive the economy, which nearly fell into recession in late 2011 and posted disappointing growth of just 0.6 percent in the third quarter.

Interest rates are expected to remain unchanged at least through the end of 2013, according to a weekly central bank poll of economists, but some analysts are revising down their forecasts sharply. Santander now sees rates at 6.25 percent next year, meaning real interest rates very close to zero.

Forecasts for the monthly rise ranged from 0.46 percent to 0.58 percent, while estimates of the 12-month inflation rate varied from 5.39 to 5.50 percent.

(Reporting by Silvio Cascione; Editing by James Dalgleish)

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