BRASILIA (Reuters) - Rising food prices likely drove Brazil's inflation rate to a 1-1/2 year high in October, a Reuters poll showed, but that spike is likely to fade in coming months.
That should give the central bank plenty of leeway to hold interest rates at an all-time low as it seeks to strengthen an underwhelming economic recovery.
Consumer prices tracked by the benchmark IPCA index probably rose 4.66 percent in the 12 months through October, according to the median of 18 forecasts ranging from 4.50 to 4.77 percent.
That would be the highest reading since mid-March 2017, firmly above the 4.5 percent midpoint of the central bank's 2018 target range. Yet the headline figure likely overstates inflationary pressures in Latin America's largest economy, economists said.
When stripped of volatile items such as power and food costs, the inflation rate has been hovering closer to 3.5 percent.
In fact, once those one-off pressures subside, Citibank economists expect inflation to end 2018 at 4.3 percent before falling to 4.25 percent in 2019 -- the exact midpoint of the central bank's target range for that year.
The IPCA, scheduled for Wednesday at 9:00 a.m. local time (1100 GMT), likely rose 0.55 percent from October, the survey showed.
Such a result would largely confirm the central bank's assessment that monetary policy ought to remain loose and allow it to hold off from hiking in the short-term.
The victory of far-right lawmaker Jair Bolsonaro in the presidential election, embraced by investors as a sign that belt-tightening reforms are coming soon, also reduced the risk of a currency selloff that could bump up import costs and wider inflation.
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