Brazil inflation matches forecasts ahead of expected rate hike

SAO PAULO, April 25 (Reuters) - Brazil's annual inflation sped up in line with market expectations in early April, official data showed on Friday, hitting its highest in more than two years ahead of the central bank's next interest rate-setting meeting in May.

The IPCA-15 consumer price index rose 5.49% in the 12 months through mid-April, statistics agency IBGE said.

That was up from 5.26% a month earlier and the highest since February 2023. The increase matched economists' forecasts in a Reuters poll and, in a silver lining, followed a slowdown in the monthly inflation rate.

The fresh figures come as markets ponder the size of an upcoming rate hike, as the central bank has left its May 7 decision open amid an uncertain economic outlook and inconclusive signs of cooling activity in Latin America's largest economy.

Policymakers at the bank continue to voice discomfort with inflation standing well above their 3% target, plus or minus 1.5 percentage points, and improving but still unanchored inflation expectations.

The bank raised interest rates by 100 basis points for the third consecutive time in March to 14.25%. It signaled a further albeit smaller hike for May, but stopped short of specifying its size.

Consumer prices in the month to mid-April alone rose 0.43%, slowing from the 0.64% increase registered in the previous month and in line with market estimates, according to IBGE.

The monthly figure was mainly driven by higher food and personal care costs, the statistics agency said, while transport prices were down.

The mid-April data mean that the central bank is likely to press ahead with a 50-basis-point interest rate hike at its next meeting, Capital Economics' deputy chief emerging markets economist Jason Tuvey said.

"But comments this week from officials that they believe tighter monetary policy is working to dampen economic activity, and thereby inflation pressures, suggest that the end of the tightening cycle is approaching," he noted.