Brazil inflation tops forecasts, sharpest March rise in 28 years

By Marcela Ayres

BRASILIA, April 8 (Reuters) - Brazil's March inflation was the highest in 28 years for that month, official data showed on Friday, exceeding expectations and fueling interest rate bets as the war in Ukraine drove fuel and food prices sharply higher.

The IPCA consumer price index BRCPI=ECI rose 1.62% from February, government statistics agency IBGE said, accelerating from 1.01% the month before and well above the 1.3% rise forecast in a Reuters poll of economists.

Brazilian interest rate futures rose across the board and economists flagged that next month's widely expected interest rate increase may not be the last of the cycle, as the central bank previously suggested.

Inflation in 12 months climbed to 11.30% through March, compared to 10.54% a month before – its highest 12-month rate since 2003 and far above the government's year-end 3.5% target.

The widespread price increases in the Friday's data may push the central bank to lift interest rates higher than thought before, said Arnaldo Lima, a strategist at Grupo Mongeral Aegon.

Policymakers have lifted Brazil's benchmark interest to 11.75% from a record-low 2% in March 2021, signaling another 100-basis-point hike in May.

Central bank chief Roberto Campos Neto has said 12-month inflation would likely peak at 11% in April and next months' interest rate hike would be the last of the cycle, barring unexpected developments.

But even before the March inflation data, some economists were predicting the need for even more monetary tightening, with Credit Suisse and BNP Paribas projecting rates would top out this year at 14% and 14.5%, respectively.

Consumer prices in Chile also soared 1.9% in March, data showed on Friday, the sharpest rise for the month since 1993, as surging commodity prices put central banks across Latin America under pressure.

In Brazil, eight of the nine price categories tracked by IBGE rose in March, with the strongest pressure coming from transportation, up 3.02% in the month, and food and beverages, which rose 2.42%.

Those two categories alone contributed almost three quarters of the monthly headline inflation, IBGE added.

The statistics agency highlighted that transportation costs were driven by a 6.7% rise in fuel prices.

State-run oil company Petrobras PETR4.SA announced a sharp increase in fuel prices in mid-March, tracking global markets after Russia's invasion of Ukraine prompted a surge in energy prices.
Reporting by Marcela Ayres Editing by Brad Haynes and Alistair Bell

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