Brazil annual inflation slows in early December as markets eye 2026 rate cuts

SAO PAULO, Dec 23 (Reuters) - Brazil's annual inflation slowed in early December, official data showed on Tuesday, as markets expect the central bank to start lowering interest rates early next year.

• Consumer prices in Latin America's largest economy rose 4.41% in the 12 months through mid-December, statistics agency IBGE said.

• The figure was below both the 4.50% recorded a month earlier and the 4.43% forecast by economists in a Reuters poll.

• In the month to mid-December, prices rose 0.25%, up from 0.20% in the previous month, while economists expected a 0.27% rise.

• The monthly result was driven mainly by higher transportation costs, as airfares surged.

INTEREST RATE PATH

• Brazil's central bank has kept its key rate at 15%, the highest in nearly two decades, to tame sticky inflation.

• The bank has a 3% inflation target, plus or minus 1.5 percentage points, and has vowed to pursue that mid-point.

• As inflation slows, most economists in a weekly central bank poll expect monetary easing to start in March.

• Pablo Spyer, a board member at brokerage industry group Ancord, said that a January cut was "off the radar" as inflation is under control but far from comfortable.

• "The central bank is expected to maintain a cautious stance, waiting for more consistent evidence of a slowdown in services inflation," Spyer said.