Brazil annual inflation seen close to 10 percent in October

By Silvio Cascione

BRASILIA (Reuters) - Brazil's annual inflation rate probably approached 10 percent in October, the highest in 12 years, in another blow to consumers already grappling with job losses and a stronger dollar.

Consumer prices were seen rising 9.91 percent in the 12 months through October , up from 9.49 percent in September, according to the median of 22 forecasts for the benchmark IPCA index due out on Friday at 9 a.m.

The forecasts ranged between 9.60 and 9.96 percent.

On a monthly basis, prices probably gained 0.80 percent , up from an increase of 0.54 percent in the previous month, according to the median of 23 estimates ranging from 0.52 to 0.85 percent in the poll of economists.

A recent increase in fuel prices by the cash-strapped state firm Petroleo Brasileiro SA is expected to be a major driver for the inflation surge, in an example of how Brazil's budget crisis continues to put pressure on inflation despite a string of central bank interest rate hikes.

Petrobras, as the company is known, lifted the price of gasoline by 6 percent and diesel by 4 percent on Sept. 30 to help service the world's largest debt among major oil producers.

There is also talk of a fuel tax increase in coming months which could drive gasoline prices even higher, especially if Congress rejects the creation of a financial tax proposed by Finance Minister Joaquim Levy, economists say.

The October inflation figures may also add to evidence of import-related price pressures from a recent surge in the U.S. dollar against the Brazilian real. UBS economists in a report said prices of industrial goods likely increased 5.2 percent in the 12 months through October, up from 4.9 percent in the previous month, as a result of the weaker exchange rate.

"The recent sell-off in the Brazilian real will certainly affect 2016 inflation. This, combined with further tax increases and reduction in subsidies, poses considerable upside risks to our 5.8 percent IPCA forecast for 2016," the UBS economists led by Rafael de la Fuente wrote.

The Brazilian government targets inflation at 4.5 percent, with a tolerance margin of 2 percentage points. The central bank has raised interest rates to 14.25 percent this year, weighing on the country's recession in an attempt to keep prices in check. It is not expected to cut rates until late 2016.

(Reporting by Silvio Cascione Editing by W Simon)

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