UPDATE 1-Brazil's inflation slows in mid-July
(Adds table, market reaction, details on food and apparel prices) By Silvio Cascione BRASILIA, July 22 (Reuters) - Brazil's inflation slowed in the month to mid-July as the economy headed into recession, potentially paving the way for a smaller interest rate hike by the central bank later this month. Brazil's IPCA-15 consumer price index rose 0.59 percent in the month to mid-July as expected by economists in a Reuters poll, down from 0.99 in the previous month, government statistics agency IBGE said on Wednesday. Trailing 12-month inflation remained high at 9.25 percent, more than double the official 4.5 percent target. But the decline in the monthly inflation rate, led by a smaller increase in food and transportation prices and a drop in apparel, underpinned hopes that Brazil's inflation could finally peak after a steep surge since late last year. Central bank director Tony Volpon earlier this week hinted the bank could slow down the pace of rate hikes as inflation expectations drop and price increases start to ease. Most economists still expect the bank to raise its benchmark rate by 50 basis points later this month, but many analysts have changed their views to favor a 25-point hike, to 14 percent. Yields on short-dated interest rate futures dropped as traders added bets on a smaller rate hike in the upcoming rate-setting meeting on July 29. Long-dated yields rose. Inflation in Latin America's largest economy has spiked after President Dilma Rousseff hiked utility rates and other government-set prices following her re-election. Electricity prices continue to rise sharply in the month to mid-July, climbing 1.91 percent from the previous month. Water and sewage rates rose 4.10 percent, IBGE said. A vast majority of Brazilians - 84.6 percent - believe Rousseff is unable to handle the country's economy, and more than half want her impeached over a massive corruption scandal at state-run oil company Petroleo Brasileiro SA, according to an opinion survey on Tuesday. Below is the result for each price category: July June - Food and beverages 0.64 1.21 - Housing 1.15 1.03 - Household articles 0.47 0.69 - Apparel -0.06 0.68 - Transport 0.14 0.85 - Health and personal care 0.80 0.87 - Personal expenses 0.83 1.79 - Education 0.10 0.18 - Communication 0.59 0.08 - IPCA-15 0.59 0.99 (Reporting by Silvio Cascione; Editing by Chizu Nomiyama)
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