UPDATE 2-Brazil inflation slows in October but stays above annual goal
(Adds finance minister, market comments) RIO DE JANEIRO, Nov 7 (Reuters) - Brazil's annual inflation lost momentum in October but remained above the official target range, increasing the risk of the central bank overshooting its year-end goal for the first time in more than a decade. Consumer prices, as measured by the IPCA index, rose 6.59 percent in the 12 months through October, easing from 6.75 percent in September, government data showed on Friday. The number came in below market consensus of 6.65 percent. On a monthly basis, consumer prices rose 0.42 percent in October, compared with 0.57 percent in September. The central bank targets inflation at 4.5 percent for each calendar year with a tolerance margin of 2 percentage points. Last time it overshot that goal was in 2003. A smaller increase in food and transportation prices helped bring down inflation last month, statistics agency IBGE said. However, a government-sponsored fuel price increase announced on Thursday is likely to drive inflation higher in November. The fuel price hike will add about 0.1 percentage points to inflation, outgoing Finance Minister Guido Mantega told journalists on Friday. State-run oil company Petróleo Brasileiro SA raised wholesale gasoline and diesel prices by 3 and 5 percent respectively, the first hike in nearly a year. Yields on interest-rate futures contracts <0#2DJI:> rose on Friday on concern that stubbornly high inflation will prompt the central bank to increase interest rates in the next few months. "The larger-than-expected drop in Brazilian inflation last month will come as a welcome relief to policymakers but is unlikely to prevent interest rates from rising further over the coming months," said Neil Shearing, chief emerging markets economist at Capital Economics, in London. Brazil's benchmark Selic interest rate is currently at 11.25 percent after a surprising hike last week. The bank on Thursday hinted at further rate increases to bring inflation towards the 4.5 percent target. Mantega also reiterated Brazil's need to boost government savings next year. Economists often cite hefty government spending as a chief reason for Brazil's high inflation. Below is the result for each price category: October September - Food and beverages 0.46 0.78 - Housing 0.68 0.77 - Household articles 0.19 0.34 - Apparel 0.62 0.57 - Transport 0.39 0.63 - Health and personal care 0.39 0.33 - Personal expenses 0.36 0.39 - Education 0.11 0.18 - Communication -0.05 0.13 - IPCA 0.42 0.57 (Reporting by Rodrigo Viga Gaier and Felipe Pontes in Rio de Janeiro; Silvio Cascione in Brasilia and Asher Levine in Sao Paulo; Editing by Guillermo Parra-Bernal and W Simon)
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