Brazil's annual inflation rate broke through the ceiling of the central bank's target range in March at 6.1 per cent, officials said Friday, adding to headaches for policy makers facing an economic slowdown and rising prices.
The rate increased sharply from 5.2 per cent in February and far surpassed the central bank's target limit of 5.25 per cent, making it almost certain the bank will hike interest rates for the second straight time at its next meeting in May, analysts said.
That would further put the brakes on price increases but also economic growth, at a time when Latin America's biggest economy is already showing signs of trouble as a deadly surge of Covid-19 wreaks havoc on the country. "The central bank is clearly worried by above-target inflation and another 75 basis-point hike in the Selic (benchmark interest) rate, to 3.5 per cent, at the next meeting in May looks likely," said consulting firm Capital Economics.The monthly inflation rate came in at 0.93 per cent, a six-year high for March, said national statistics institute IBGE.
The central bank's annual inflation target is 3.75 per cent, plus or minus 1.5 percentage points.
Rising prices led the bank to hike the interest rate by a larger-than-expected 0.75 points last month, after holding it at a record low of two percent for seven months to counter the economic blow of the pandemic.
Brazil's economy shrank 4.1 per cent last year, its third-biggest contraction on record but better than many major economies. It is expected to regain some ground this year, but the outlook has been dimming amid an explosion of Covid-19.Experts polled by the central bank are forecasting GDP growth of 3.17 per cent this year, down from 3.26 per cent four weeks ago. Brazil's health system is struggling amid the world's highest average daily death toll in the pandemic, with 2,820 people a day killed by the virus over the past week in the country of 212 million people.Covid-19 has claimed more than 345,000 lives in Brazil, second only to the United States.
Far-right President Jair Bolsonaro, who has railed against lockdowns, face masks and vaccines to contain the pandemic, faces mounting pressure to get the health crisis under control, including from the business sector.