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