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UPDATE 2-Brazil's inflation slows in mid-July, but remains high
July 22, 2014 / 12:31 PM / in 3 years

UPDATE 2-Brazil's inflation slows in mid-July, but remains high

(Adds analyst comment, World Cup impact)
    By Silvio Cascione
    BRASILIA, July 22 (Reuters) - Consumer prices in Brazil rose
less than expected in the month to mid-July as food prices and
airfares eased, but 12-month inflation still climbed to the
upper limit of the official target, government data showed on
    The IPCA-15 index rose 0.17 percent in the
month to mid-July, down from 0.47 in mid-June, statistics agency
IBGE said. The index had been expected to rise 0.20 percent.
    In the 12 months through mid-July, consumer prices
 rose 6.51 percent, from 6.41 percent in mid-June.
The top end of the central bank's target range is 6.5 percent.
    Stubbornly high inflation has contributed to slowing
economic growth, now at a near standstill. It also has eroded
the credibility of the central bank's efforts to curb
inflationary pressures and poses a threat to President Dilma
Rousseff's campaign for re-election in October. 
    "Price increases are usually small in the middle of the year
so we should not give too much importance to the monthly print.
Inflation remains worrisome," said Natalia Cotarelli, an
economist with Banco Indusval & Partners.
    Yields on interest rate futures <0#2DIJ:> on Tuesday were
little changed as traders stuck to bets that the central bank
will refrain from raising its benchmark Selic interest rate to
avoid hurting Brazil's already sluggish economy. 
    Some investors see the chance of an interest rate cut as
soon as September as the economy nears a recession. But a member
of the government's economic team last week told Reuters that it
is too early for that. 
    The bank lifted the Selic rate for nine meetings in a row
until April to 11 percent, and has said recently
that the rate increases are yet to take full effect on consumer
prices. The bank sees inflation near the 6.5 percent mark for
some months ahead, and forecasts consumer prices will start to
ease more sharply only next year.
    The World Cup, which ended of July 13, had a mixed impact on
    On the one hand, hotel rates jumped 28.6 percent.
    But airfares retreated after the beginning of the tournament
on June 12, having risen beforehand. As a result, transportation
costs overall fell 0.85 percent in the month to mid-July.
    Below is the result for each price category:    
                               July     June
 - Food and beverages          -0.03    0.21
 - Housing                     0.48     0.29
 - Household articles          0.66     1.00
 - Apparel                     0.00     0.67
 - Transport                   -0.85    0.50
 - Health and personal care    0.52     0.67
 - Personal expenses           1.74     1.09
 - Education                   -0.07    0.13
 - Communication               -0.10    0.00
 - IPCA-15                     0.17     0.47

 (Reporting by Silvio Cascione; Editing by Nick Zieminski and W

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