UPDATE 2-Brazil inflation quickens unexpectedly as tomato prices spike

miércoles 10 de junio de 2015 10:24 GYT

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    By Silvio Cascione
    BRASILIA, June 10 (Reuters) - Brazilian inflation picked up
unexpectedly in May as food and electricity prices jumped,
raising the odds of further interest rate hikes by the central
bank despite a likely recession.
    Brazil's benchmark IPCA consumer price index 
rose to an 11-year-high of 8.47 percent in the 12 months through
May, well above the government's 4.5 percent inflation target,
statistics agency IBGE said on Wednesday.
    Month-on-month, consumer prices rose 0.74 percent from
April, up from an increase of 0.71 percent in April and above
market expectations of 0.59 percent.
    Higher food prices were the biggest surprise, since May is
customarily a month in which food price inflation eases,
economists said. Bad weather propelled tomatoes and onion prices
more than 20 percent higher.
    Electricity rates also spurred inflation in May, IBGE said,
climbing more than 10 percent in coastal cities such as Recife
and Salvador.
    Brazil's already-elevated inflation has accelerated while
the economy tumbles, costing hundreds of thousands of jobs in
recent months.
    Economists widely see the economy sliding into recession
this year as policymakers curb spending and raise interest
    At 13.75 percent, the central bank's Selic rate 
is the highest benchmark interest rate among the world's 10
largest economies.
    On Wednesday, yields on rate futures rose <0#2DIJ:> as
traders added bets Brazil's central bank, intent on lowering
inflation to the 4.5 percent target by end-2016, will raise its
benchmark rate in July and possibly in September. 
    "Tighter monetary policy will do little to tame either food
inflation or the impact of regulated price increases," Neil
Shearing, chief emerging markets economist at Capital Economics,
wrote in a report. "Even so, today's data probably tip the
balance in favour of another increase in the Selic next month." 
    Brazil's galloping price pressures contrast with Mexico,
which on Tuesday reported annual inflation in May eased to 2.88
percent, a record low. 
    Below is the result for each price category:     
                                      May       April
 - Food and beverages                1.37        0.97
 - Housing                           1.22        0.93
 - Household articles                0.36        0.66
 - Apparel                           0.61        0.91
 - Transport                        -0.29        0.11
 - Health and personal care          1.10        1.32
 - Personal expenses                 0.74        0.51
 - Education                         0.06        0.21
 - Communication                     0.17        0.31
 - IPCA                              0.74        0.71
 (Additional reporting by Rodrigo Viga Gaier in Rio de Janeiro;
Editing by Andrew Hay and W Simon)