Brazil food prices seen rising, pressuring overall inflation
By Camila Moreira
SAO PAULO, June 21 (Reuters) - Poor crop weather across Brazil will keep food prices high, adding to overall inflation despite a sharp slowdown in mid-June, economists predicted on Tuesday.
They said rising prices, in turn, will pressure the central bank's new board to delay monetary easing until later this year, making it harder to fight a lingering recession.
The annual inflation rate slowed more than expected in mid-June to 8.98 percent, down from 9.62 percent in mid-May, statistics agency IBGE said, citing a sharp slowdown in food inflation as the main reason.
But economists said prices for staples such as beans are probably headed higher, as are prices for grains used as livestock feed. The reason: excess or little rain in grain-producing states coupled with cold waves and hot spells at the start of the crop season.
Brazil's crop supply agency Conab has lowered its output forecast for corn and soy, which are in heavy demand to feed livestock. In addition, too much rain in the Parana and Minas Gerais states pushed up the price of the staple carioca bean by 7.61 percent in May from the previous month and by 41.62 percent in 12 months.
"Agricultural supply shocks should keep prices under pressure. Everything is related to the negative weather," said Elson Teles, an economist with Brazil's largest private-sector bank Itau Unibanco.
The lender has revised up its 2016 inflation forecast to 7.2 percent from 6.9 percent previously due to higher grain prices.
The central bank has also cited "temporary" food price shocks as one reason for inflation to remain high even as a two-year recession slashes jobs and wages. Continuación...