PREVIEW-Brazil inflation seen at 0.59 pct in Dec

WHAT: Brazil’s December IPCA consumer price index

WHEN: Friday, Jan. 7 at 9 a.m. (1100 GMT)

REUTERS FORECAST

Brazil’s benchmark IPCA consumer price index (BRCPI=ECI: ) is
seen rising 0.59 percent in December after spiking 0.83 percent
in November, according to the median view of 13 analysts
surveyed by Reuters. Forecasts ranged from 0.57 percent to 0.62
percent.

FACTORS TO WATCH

Food prices increases could slow after strong gains in the
previous month, said Jankiel Santos, chief economist with
Espirito Santo Investment Bank.

But inflation could speed up again at the start of the
year, analysts cautioned, especially on changes in school costs
and bus fares.

The IPCA was up 5.63 percent in the 12 months through
November.

MARKET IMPACT

A hawkish quarterly inflation report from the central bank
in December led a number of economists to change their bets for
an interest rate hike to as soon as January. Central bank
policymakers meet next on Jan. 18 and 19 to consider changes to
the Selic rate, currently at 10.75 percent.

Brazilian interest rates are currently among the world’s
highest, and the country’s new president, Dilma Rousseff, has
emphasized her desire for lower real interest rates.

Brazil’s central bank targets an inflation rate of 4.5
percent for 2011, plus or minus 2 percentage points, as a guide
in setting interest rates.

Yields on Brazilian interest rate futures contracts
(0#DIJ:: ) edged up on Wednesday. The yield on the contract due
January 2012 (DIJF2: ), among the most highly traded of the day,
ticked up to 12.1 percent from 12.02 percent.
(Reporting by Vanessa Stelzer; Additional reporting by Luciana
Lopez; Editing by Andrea Ricci)

PREVIEW-Brazil inflation seen at 0.59 pct in Dec