UPDATE 2-Brazil inflation jumps 4.46 pct in 07, hits target

(Recasts first paragraph, adds context, comment)

By Todd Benson

SAO PAULO, Jan 11 (Reuters) - Inflation in Brazil rose sharply in 2007 from the previous year, accelerating for the first time in six years as surging food prices put pressure on the central bank to keep interest rates on hold.

The IPCA broad consumer price index rose 4.46 percent last year, up from 3.14 percent in 2006 and just short of the central bank's 4.5 percent inflation target, the government statistics agency IBGE said on Friday.

The last time inflation in Brazil accelerated on an annual basis was 2002, when consumer prices surged 12.5 percent. After President Luiz Inacio Lula da Silva took office in 2003, the central bank increased interest rates to a peak of 26.5 percent and kept them high until inflation began to slow.

That strategy eventually pushed inflation to well below 4 percent, ushering in a period of relative price stability in a country with a long history of runaway inflation. But a jump in food costs in 2007 brought inflation back into the headlines.

"We're still going to see food pressuring inflation this year, but less than in 2007," said Silvio Campos Neto, chief economist at Banco Schahin in Sao Paulo, who expects the IPCA index to rise 4.3 percent in 2008.

The index BRIPCA=ECI advanced 0.74 percent in December, accelerating from a 0.38 percent rise in November, the IBGE said. The monthly result was in line with the 0.75 percent median forecast of 37 economists surveyed by Reuters. The forecasts ranged from 0.63 percent to 0.82 percent.

Food and beverage prices shot up 2.06 percent in December, the biggest monthly surge since January 2003. In 2007, food prices jumped a hefty 10.79 percent after edging up 1.22 percent in 2006.

Meat was single biggest contributor to the surge in inflation last year, with prices climbing 8.2 percent in December and 22.15 percent for 2007 as a whole.

Prices of beans, another staple of the Brazilian diet, soared 109.2 percent last year and 32 percent in December.

The central bank, which uses the IPCA as a guide when setting interest rates, also has a 4.5 percent inflation target for 2008 and 2009.

The bank has left its benchmark lending rate unchanged in its last two monetary policy meetings at an all-time low of 11.25 percent, citing inflation concerns.

The bank's monetary policy committee next meets on Jan. 22-23.

For details on Brazilian inflation by sector and regions, please click on the government data available on: here (Additional reporting by Vanessa Stelzer; Editing by Theodore d'Afflisio)