UPDATE 1-Brazil's inflation hits highest level in nearly 12 years
(Adds data, background) By Walter Brandimarte and Silvio Cascione RIO DE JANEIRO, Feb 6 (Reuters) - Consumer prices in Brazil rose at the fastest pace in nearly 12 years in January on higher transportation and electricity rates, reflecting President Dilma Rousseff's new approach toward mending the country's beleaguered economy. Brazil's benchmark IPCA consumer price index rose 1.24 percent in January, in line with analysts' forecasts. That was the highest monthly rate since February 2003. In the 12 months through January, prices rose 7.14 percent, well past the government's 4.5 percent inflation target and the 6.41 percent rate notched in December. For years, Rousseff had been criticized by investors for trying to rein in inflation by delaying increases in prices and other costs under the government's control. Intent on winning back investor confidence and fending off a credit downgrade, she changed tack after narrowly winning re-election in October. Electricity rates and bus fares, among the biggest drivers of inflation last month, jumped 8 percent. Economists say the pent-up price pressure is so high that inflation could stay above 7 percent throughout 2015. Gasoline and diesel prices went up in February on higher taxes, and electricity rates are set to climb even further in coming months. Food prices also rose sharply last month, by 1.48 percent, driven by a severe drought that also threatens to cause water rationing in Brazil's largest city and financial hub, Sao Paulo. Brazil's economic growth ground to a halt last year and according to many economists is set to fall into recession in 2015. Yields on interest rate futures <0#DIJ:> gained in early trading in Sao Paulo as traders added bets that the central bank will continue raising interest rates to keep a lid on prices. Brazil's benchmark Selic rate is currently at 12.25 percent , after three consecutive rate hikes. Below is the result for each price category: January December - Food and beverages 1.48 1.08 - Housing 2.42 0.51 - Household articles -0.28 0.00 - Apparel -0.69 0.85 - Transport 1.83 1.38 - Health and personal care 0.32 0.47 - Personal expenses 1.68 0.70 - Education 0.31 0.07 - Communication 0.15 0.00 - IPCA 1.24 0.78 (Reporting by Walter Brandimarte in Rio de Janeiro and Silvio Cascione in Brasilia; Additional reporting by Pedro Fonseca; Writing by Silvio Cascione Editing by W Simon)
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