UPDATE 1-Brazil's inflation rises less than expected in June

miércoles 8 de julio de 2015 08:46 GYT

(Adds market reaction, background)
    RIO DE JANEIRO, July 8 (Reuters) - Brazil's inflation rose
in June but at a slightly slower pace than expected, suggesting
the central bank may not need to hike interest rates much
further as the economy slips into a likely recession.
    Brazil's benchmark IPCA consumer price index 
rose 0.79 percent in June from May, the highest for the month
since 1996 but slightly below market forecasts for an increase
of 0.83 percent, statistics agency IBGE said on Wednesday.
    Yields on interest rate futures <0#2DIJ:> dropped after the
release as traders pared bets on future rate increases by the
central bank. The bank has raised its benchmark Selic rate
uninterruptedly since October to keep inflation expectations
under control despite the recent surge in prices.
    Brazil's annual inflation rate rose for a sixth straight
month in June to 8.89 percent, up from 8.47 percent in May and
nearly twice as much as the government's target of 4.5 percent.
    Inflation in Latin America's largest economy has spiked in
recent months after President Dilma Rousseff authorized hikes in
utility rates and other government-set prices following her
re-election to shore up public finances and fend off fears of a
credit downgrade.
    The latest of such hikes was in lottery prices, which pushed
up personal expenses by 1.63 percent in June from May.
    Food prices slowed their advance in June though, led by a
decline of 12 percent in tomato prices.
    High inflation is eating away at disposable income,
contributing to what is expected to be Brazil's steepest
recession since 1990. It has also enraged citizens, sending
Rousseff's popularity to a record low and encouraging some
opposition leaders to call for the president to step down.
    Below is the result for each price category:     
                                     June         May
 - Food and beverages                0.63        1.37
 - Housing                           0.86        1.22
 - Household articles                0.72        0.36
 - Apparel                           0.58        0.61
 - Transport                         0.70       -0.29
 - Health and personal care          0.91        1.10
 - Personal expenses                 1.63        0.74
 - Education                         0.20        0.06
 - Communication                     0.34        0.17
 - IPCA                              0.79        0.74
 (Reporting by Rodrigo Viga Gaier; Writing by Silvio Cascione;
Editing by W Simon)