UPDATE 2-Brazil inflation pace gains slightly in month to mid-Feb

Fri Feb 21, 2014 8:19am EST

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By Silvio Cascione
    BRASILIA, Feb 21 (Reuters) - A sharp, seasonal increase in
education costs prodded Brazil's overall inflation rate slightly
higher in the month to mid-February, government statistics
agency said on Friday.
    Prices of several food items dropped though, signalling a
hot, dry spell in Brazil's most populated areas in early
February has yet to add to inflationary pressures.
    Brazil's IPCA-15 consumer price index rose 5.65
percent in the 12 months through Feb. 15, up from 5.63 percent
one month before and slightly above the median forecast in a
Reuters poll, statistics agency IBGE said.
    On a monthly basis, the IPCA-15 index rose 0.70
percent, up from 0.67 in the previous month.
    Brazil's central bank sets its benchmark rate in an effort
to steer inflation toward the official target center of 4.5
percent, a level it has not achieved in more than three years. 
    Still, yields on interest rate futures were little
changed, signalling most traders sticked to their bets that the
central bank will slow down the pace of interest rate hikes next
week as inflation remains near the lowest in about a year.
    The Selic rate is currently at 10.50 percent.
    Education costs jumped 6.05 percent from mid-January, up
from a 0.50 percent increase in the prior month, due to seasonal
increase in tuition at the start of the Brazilian school year.
    However, food prices rose just 0.52 percent, down from 0.96
percent in the month to mid-January, thanks to a sharp drop in
prices of milk, poultry, beans and tomato prices.
    The future impact of the dry spell on food prices remained
unclear as rain started to pour down in many producing areas
over the past week. Conab, Brazil's government supply agency,
last week said the weather has not yet had an impact on its 2014
crop forecasts. 
    The drought in Sao Paulo and other southern states also
raised the threat of water rationing and of widespread increases
in energy rates, which will likely fuel inflation later this
year, analysts say.
    The average of the three main core inflation measures rose
to 0.69 percent in the month to mid-February from 0.55 percent
in the previous reading, according to Banco Fator estimates.
    The so-called diffusion index, which measures the proportion
of goods and services that had price increases, dropped to 70.4
from 75.1 percent.
     
                               February    January
 - Food and beverages                0.52        0.96
 - Housing                           0.64        0.58
 - Household articles                1.17        0.49
 - Apparel                          -0.68        0.59
 - Transport                        -0.09        0.43
 - Health and personal care          0.75        0.41
 - Personal expenses                 1.19        1.31
 - Education                         6.05        0.50
 - Communication                     0.17       -0.02
                                                     
 - IPCA-15                           0.70        0.67
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