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Bloomberg

Brazil’s inflation slowed more than forecast by all analysts in October as food and transportation price increases eased.

Monthly inflation as measured by the benchmark IPCA index slowed to 0.42 percent from 0.57 percent in September, the national statistics agency said today in Rio de Janeiro. That compares with a median estimate for a 0.48 percent rise from economists surveyed by Bloomberg. Annual inflation decelerated to 6.59 percent from 6.75 percent a month earlier.

Dilma Rousseff won re-election Oct. 26 after pledging during the campaign to do an “even better” job controlling inflation, which has persisted above the midpoint of the target throughout her presidency. Policy makers caught economists off guard last week when they raised the benchmark interest rate for the first time since April, saying the move would reduce the cost of taming consumer price expectations in the next two years.

Swap rates on the contract due January 2017 rose 5 basis points, or 0.05 percentage point, to 12.67 percent at 9:05 a.m. local time. The real gained 0.2 percent 2.5645 per U.S. dollar.

Food and beverage prices in October rose 0.46 percent, after a 0.78 percent rise in September, the statistics agency said in today’s report. Transportation costs rose 0.39 percent, down from 0.63 percent the previous month.

Policy makers last week raised the benchmark interest rate by a quarter-point to 11.25 percent, surprising 53 of 54 analysts surveyed by Bloomberg who forecast borrowing costs would remain unchanged for a fourth straight meeting. Three of the eight board members voted to hold at 11 percent.

’Remain Vigilant’

Monetary policy will “remain vigilant” as a weaker real and increases to government regulated prices elevate inflationary risks, according to minutes of the central bank meeting published yesterday. Brazil’s real has depreciated 10.6 percent in the past three months, the most among major currencies tracked by Bloomberg after the Japanese yen.

Regulated prices for items such as gasoline and electricity rose 5.57 percent in the 12 months through October versus 5.32 percent in September, the statistics institute said.

State-controlled oil company Petroleo Brasileiro SA yesterday said it would boost gasoline and diesel prices by 3 percent and 5 percent respectively. Power regulator Aneel this week approved a 19 percent average rate increase for Rio-based utility Light SA. That followed Aneel’s approval last month of rate increases for Bandeirante Energia and CPFL Piratininga.

Price increases have contributed to falling consumer confidence, which in October reached its lowest level in more than five years, according to the Getulio Vargas Foundation, a Brazilian research group and business school.

Economists surveyed by the central bank Oct. 31 forecast inflation will slow to 6.45 percent by December, which still would be the fastest year-end rate since 2011. The central bank targets inflation of 4.5 percent with a plus or minus two percentage points leeway.