* 12-month IPCA rises 6.70 pct, most since October 2011
* Food prices stabilize, suggesting lower inflation ahead
* Yields on rate futures drop
By Silvio Cascione
SAO PAULO, July 5 Brazil's inflation climbed at
the fastest pace in 20 months in June but rose less than
forecast, supporting hopes that increases in consumer prices
could start to slow even after a sharp currency sell-off.
Brazil's benchmark IPCA consumer price index
rose 6.70 percent in the 12 months through June, exceeding the
official target and climbing at the fastest pace since October
2011, government statistics agency IBGE said on Friday.
The ceiling of the government's target range is 6.5 percent.
On a monthly basis, Brazil's benchmark IPCA consumer price
index rose 0.26 percent in June. The index had been
expected to rise 0.33 percent from May, according to the median
forecast of 31 economists surveyed.
The majority view is that the IPCA annual rate peaked last
month, with most analysts seeing 12-month inflation below 6
percent by year-end and calling for two or three more rate hikes
by the central bank just to ensure that expectations for next
year stay under control.
Food price increases, one of the leading inflation drivers
late last year, showed further signs of moderation, offering
President Dilma Rousseff some relief after a steep drop in her
approval ratings. Food prices edged up 0.04 percent in June,
compared with an increase of 0.31 percent in May.
Yields on interest rate futures slid after the
release of the inflation data, as traders pared bets on a long
series of increases in the benchmark rate, known as Selic
, from the current level of 8.00 percent.
The central bank meets next Wednesday, when it is expected
to raise rates by 50 basis points, according to most economists
The biggest inflation risk now is the steep drop in Brazil's
currency, the real, which has lost about 12 percent
against the U.S. dollar since early May and is not expected to
rebound any time soon, according to a separate Reuters poll.
A significant part of June's increase was due to higher bus
fares, the main trigger of Brazil's largest street protests in
decades. Transportation prices rose 0.14 percent, reversing a
decline of 0.25 percent in the previous month.
The hikes were later revoked, which should push inflation
lower in July, economists said.
Below is the result for each price category:
- Food and beverages 0.04 0.31
- Housing 0.57 0.75
- Household articles 0.12 0.46
- Apparel 0.50 0.84
- Transport 0.14 -0.25
- Health and personal care 0.36 0.94
- Personal expenses 0.40 0.41
- Education 0.18 0.06
- Communication 0.19 0.08
- IPCA 0.26 0.37