(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 pressures. 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 end-2016. 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)
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