UPDATE 1-Brazil inflation eases as transport, food prices fall

Fri Jul 19, 2013 8:46am EDT

* IPCA-15 index up 6.40 percent in 12 months to mid-July
    * Inflation returns below ceiling of government target


    By Asher Levine
    SAO PAULO, July 19 (Reuters) - A drop in transportation and
food prices helped Brazil's inflation rate fall back below the
ceiling of the government's target in the year to mid-July, data
showed on Friday.
    Brazil's benchmark IPCA-15 inflation index rose
6.40 percent in the 12 months through mid-July, down from 6.67
percent one month earlier, according to government statistics
agency IBGE.
    The index had been expected to rise 6.43 percent in the
period, according to the median forecast of 16 analysts surveyed
by Reuters. Estimates ranged from 6.32 percent to 6.50 percent.
    The government targets inflation at 4.5 percent, plus or
minus two percentage points.
    On a monthly basis, inflation was 0.07 percent, below the
median analyst forecast and down from 0.38 percent one month
earlier.
        
     

    A number of Brazilian cities including Rio de Janeiro and
Sao Paulo lowered bus and subway fares last month in response to
protests that grew into nationwide demonstrations against poor
public services, police violence and graft.
    The move contributed to a 0.55 percent drop in transport
prices in the month to mid-July.
    Food prices, one of the main factors fueling inflation
earlier this year, fell 0.18 percent from the previous month. 
    The majority view is that Brazilian inflation peaked last
month, with most analysts seeing 12-month inflation below 6
percent by year-end. Most of them also call for at least two
more interest rate increases by the central bank just to ensure
that expectations for next year stay under control.
 
    In recent months, stubbornly high inflation has dented
consumer confidence, undermining an already fragile economic
recovery and eroding President Dilma Rousseff's high popularity.
The central bank has raised interest rates three times since
April and has pledged to keep increasing them until inflation
slows.

    Below is the result for each price category:     
     
                                 June      July
                                               
 - Food and beverages            0.27     -0.18
 - Housing                       0.57      0.60
 - Household articles            0.68     -0.06
 - Apparel                       0.72     -0.17
 - Transport                     0.10     -0.55
 - Health and personal care      0.72      0.20
 - Personal expenses             0.37      1.08
 - Education                     0.17      0.11
 - Communication                 0.12      0.15
                                               
 - IPCA-15                       0.38      0.07
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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