Brazil inflation overshoots forecasts, economists see higher rate hikes

SAO PAULO, Nov 26 (Reuters) - Brazil's consumer prices rose more than expected in the month to mid-November, data from statistics agency IBGE showed on Tuesday, fueling bets that the central bank may accelerate the pace of its ongoing monetary tightening cycle.

Prices as measured by the benchmark IPCA-15 index were up 0.62% in the period, IBGE said, while annual inflation reached 4.77%, speeding up from 4.47% a month earlier and above the upper end of the central bank's 1.5% to 4.5% target range.

Economists polled by Reuters had forecast the monthly rate to come in at 0.48%, while the 12-month figure was expected at 4.62%.

The latest figures come as markets eagerly await the announcement of a government fiscal package with spending cut measures, and ahead of the central bank's final interest rate decision of 2024.

The monetary authority earlier this month accelerated its tightening with a 50-basis-point interest rate hike to 11.25%, leaving the door open for further increases while underscoring the need for fiscal discipline to counter inflation.

The bank's board is scheduled to announce its next policy decision on Dec. 11.

Citi economists said they expect policymakers to speed up hikes again with a 75-basis-point increase next month and keep raising the benchmark Selic rate until 13.25% in March 2025, kicking off cuts only in 2026.

"The combination of the persistent currency depreciation, the steady de-anchoring process of inflation expectations, the robust/above potential economic growth and the limited slackness in the labor market mean a quite challenging inflation outlook," they wrote.

The mid-November inflation figure was fueled by higher food and beverage prices, IBGE said, noting they have now risen for three consecutive months, as meat prices jumped.

Transportation costs were also up, driven by a 22.5% rise in air ticket prices.

Capital Economics economist Jason Tuvey said the data meant the central bank is likely to raise interest rates further than previously expected. He now forecasts the benchmark rate to peak at 13% in the first half of 2025, up from 12% before.

"But a lot rests on the details of the government's proposed spending cuts. Failure to soothe investors' fears about the state of the public finances could prompt even more aggressive hikes," Tuvey added.

Finance Minister Fernando Haddad said on Monday that incoming central bank chief Gabriel Galipolo attended a meeting with President Luiz Inacio Lula da Silva at Lula's request to share "how he perceived what was going to be announced." (Reporting by Gabriel Araujo; Editing by Chizu Nomiyama and Alistair Bell)