UPDATE 2-Brazil inflation quickens unexpectedly as tomato prices spike
(Adds comments, background, graphic) 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 rates. 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)
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