UPDATE 1-Brazil annual inflation eases to lowest in a year in June

(Adds data, background)
    BRASILIA, July 8 (Reuters) - Brazil's annual inflation rate
fell in June to the lowest in a year as transport costs
retreated, heading in the direction of the target of the central
bank, which has maintained high interest rates to curb price
    Consumer prices as measured by the benchmark IPCA index
 rose 8.84 percent in the 12 months through June,
the slowest rate since May 2015 and down from an increase of
9.32 percent in the previous month.    
    The government's official target is 4.5 percent, a goal the
central bank expects to meet only by end-2017. 
    With the battle against inflation a priority, the central
bank has kept its benchmark interest rate at 14.25 percent, the
highest in nearly a decade, despite rising unemployment and
corporate defaults during a severe recession.
    Prices rose 0.35 percent in June from May, compared with an
increase of 0.78 percent in the previous month and a median
expectation of 0.37 percent in a Reuters poll, government
statistics agency IBGE said on Friday.
    Brazil's inflation has eased from double-digit rates as the
economic downturn has gone into its second year. The central
bank has pledged to lower the inflation rate to 6.5 percent by
    Food prices slowed their advance in June after rising more
than expected in recent months but still were the leading
inflation driver, IBGE said.  
    Water and sewage rates also drove inflation up after an
increase in utility fares in Salvador, Brasília, Belo Horizonte
and São Paulo, IBGE said. Transportation prices fell as airfares
dropped 4.5 percent from May.
    Yields on interest rate futures <0#2DIJ:> were down.
    Below is the result for each price category: 
                              June         May       
- Food and beverages          0.71         0.78     
- Housing                     0.63         1.79      
- Household articles          0.26         0.63     
- Apparel                     0.32         0.91     
- Transport                  -0.53        -0.58     
- Health and personal care    0.83         1.62     
- Personal expenses           0.35         1.35     
- Education                   0.11         0.16     
- Communication               0.04         0.01     
- IPCA                        0.35         0.78     

 (Reporting by Silvio Cascione Editing by W Simon)