By Marcela Ayres
BRASILIA (Reuters) - Brazil's annual inflation hit a six-year high of over 10% in 2021, government data showed on Tuesday, well above the central bank's year-end target range and raising pressure on policymakers for more aggressive interest rate hikes.
The benchmark IPCA consumer price index rose 10.06% last year, the highest annual rate since 2015, statistics agency IBGE said. The result was higher than the 9.97% median forecast in a Reuters poll of economists.
By law, central bank chief Roberto Campos Neto was obliged to write an open letter explaining why annual inflation had missed the official target range. It was the sixth such letter since the current inflation-targeting regime was created in 1999. The last time was in 2017.
Campos Neto said steps have been taken to ensure inflation targets are met for 2022, 2023 and 2024, reaffirming the need to keep raising rates "significantly into restrictive territory."
The surge in inflation pushed Brazil's central bank into one of the most aggressive rate hike cycles in the world last year, raising its benchmark interest rate to 9.25% in December from 2% in March.
Policymakers have already signaled another 150-basis-point increase in February and said the country's monetary tightening may last longer until inflation expectations are back on track, a message Campos Neto repeated in his letter.
Higher borrowing costs helped to tip Brazil into a recession last year, helping to cool inflation pressures in recent months.
The country's 12-month inflation rate eased in December from 10.74% in November, the first decline since May 2020.
Still, the full 2021 print missed both the central bank's annual target of 3.75% and the 5.25% top of its tolerance band.
The index rose 0.73% in December alone, IBGE said, above the 0.65% forecast in a Reuters poll, mostly driven by clothing prices, which rose 2.06%.
Transport was mainly responsible for the sharp price increase in Latin America's largest economy last year, with annual gains of 21%. That was driven by a 49% annual spike in fuel prices. Housing costs had an annual rise of 13% with a 21% jump for electricity.
Campos Neto said inflation missed the target mostly due to rising prices of imports, especially oil, along with other commodities. A weaker currency also contributed to the impact, he said in his letter, due to fiscal concerns in the second half of the year.
Campos Neto also cited a spike in energy prices and global supply chain bottlenecks as inflation causes.
Analysts expect inflation and higher interest rates to drag on the economy in 2022, hurting household demand and discouraging corporate investments.
The central bank's latest weekly survey of economists showed they lowered their forecasts for economic growth this year to just 0.28%, with expected inflation of 5.03% - again above the upper limit of the official inflation target of 3.50% for 2022, with a 1.5 percentage point margin of error on either side.