SAO PAULO (Reuters) - Brazil's consumer prices as measured by the benchmark IPCA index rose more than expected in July, data from government statistics agency IBGE showed on Friday, but the figures are unlikely to stop the central bank from keep lowering interest rates.
Prices were up 0.12% in the month, IBGE said in a statement, above market forecasts of 0.06%.
That took annual inflation to 3.99%, up from 3.16% in the previous month and also beating the 3.93% expected by economists polled by Reuters.
The fresh data came just as the central bank earlier this month kicked off a monetary easing cycle after maintaining its benchmark interest rate on hold at a six-year high of 13.75% for nearly a year in a bid to tame high inflation.
The 50-basis-point cut announced on Aug. 2 was more aggressive than markets had expected, with the central bank signaling more of the same in the months ahead due to an improving inflation outlook.
The uptick in annual inflation in July was already expected because of unfavorable base effects, and economists do not project the latest figures to change the central bank's stance on the rate cuts.
"The jump in Brazilian inflation last month won't stop Copom from lowering interest rates at its September meeting," said Capital Economics' chief emerging markets economist, William Jackson.
"By the same token, however, the figure probably rules out the possibility of a larger rate cut than the 50 basis points delivered earlier this month," he added.
Inflation in July was driven by higher transportation costs due to an increase in fuel prices, the statistics agency said. Food and housing costs, on the other hand, dropped in the month.
Annual inflation, despite the increase last month, remains within the central bank's target range of 1.75% to 4.75% for this year.
"Inflation remains close to its cyclical low, despite the uptick last month, and inflation expectations are falling," said Pantheon Macroeconomics' chief Latin America economist, Andres Abadia.
"The inflation rate will edge marginally higher over the coming months, but underlying conditions will remain favorable for the central bank to keep cutting rates."