UPDATE 1-Brazil's annual inflation slightly up; airfares down

viernes 6 de junio de 2014 09:13 GYT
 

* Airfares drop 21 percent weeks before World Cup
    * Annual inflation rate remains near target ceiling

 (Adds background, details on airfares, World Cup)
    By Silvio Cascione
    BRASILIA, June 6 (Reuters) - Brazil's annual inflation rate
edged up slightly in May, but food and transportation prices
showed further signs of relief, supporting the central bank's
strategy to hold interest rates for now.
    Brazil's benchmark IPCA consumer price index 
rose 6.37 percent in the 12 months through May, accelerating
from 6.28 percent in April and near the median expectations in a
Reuters poll, statistics agency IBGE said.
    On a monthly basis, the IPCA index rose 0.46
percent, slowing from 0.67 percent in April.
    In welcome news for Brazilian authorities and soccer fans,
airfares dropped a sharp 21 percent from April, the second
monthly decline in a row right on the eve of the World Cup. 
    The drop suggests a sharp increase in airfares earlier this
year might have meant carriers had overestimated demand for
flights during the tournament. It also signals part of the
impact the World Cup could have on the inflation rate might have
already happened.
    Food prices, which spiked earlier this year due to a drought
in Southern Brazil, also slowed their advance. They rose 0.58
percent, less than half the pace seen in the previous month.
    Still, services costs continued to rise sharply as
unemployment remains near record lows. For example, personal
expenses such as hairdressing and lottery rose 0.80 percent.
    Brazil's annual inflation rate remains near the 6.5 percent
top end of the official target range. Still, the central bank
signaled on Thursday that rates could stay on hold through the
rest of the year after it had raised them nine straight times
until April as it waits to see how the tightening affects prices
and slowing economic growth.
    Stubbornly elevated inflation is a headache for President
Dilma Rousseff, who will seek re-election in October. It has
also undermined business and consumer confidence, curbing
investments and family consumption over the past few months.
    Brazil's benchmark Selic rate is currently at 11 percent.
    Water-saving incentives to avoid rationing in Sao Paulo,
Brazil's largest city, also helped curb inflation in May. Cia de
Saneamento Básico do Estado de São Paulo SA is
offering a discount to clients who reduce their monthly water
consumption by at least 20 percent through December.
            
    Below is the result for each price category:
    
                                      May       April
 - Food and beverages                0.58        1.19
 - Housing                           0.61        0.87
 - Household articles                1.03        0.20
 - Apparel                           0.84        0.47
 - Transport                        -0.45        0.32
 - Health and personal care          0.98        1.01
 - Personal expenses                 0.80        0.31
 - Education                         0.13        0.03
 - Communication                     0.11        0.02
                                                     
 - IPCA                              0.46        0.67
 
 (Reporting by Silvio Cascione Editing by W Simon and Lisa Von
Ahn)