UPDATE 1-Brazil's inflation picks up in mid-December as food prices jump

viernes 18 de diciembre de 2015 07:53 GYT

(Adds table, market reaction, background)
    By Silvio Cascione
    BRASILIA, Dec 18 (Reuters) - Consumer prices rose in Brazil
more than 1 percent in the month to mid-December as food prices
soared, increasing the chances the central bank will raise
interest rates next year despite a deep recession.
    Brazil's IPCA-15 consumer price index rose 1.18
percent in the month to mid-December, up from 0.85 the previous
month, government statistics agency IBGE said on Friday. The
index had been expected to rise 1.11 percent, according to the
median forecast in a Reuters poll.
    In the 12 months through mid-December, consumer prices
jumped 10.71 percent, the highest since November 2003 and up
from 10.28 percent last month. 
    The government targets inflation at a much lower 4.5
percent, a goal analysts see as unfeasible until at least 2017,
even with some of the world's highest interest rates.
    Brazil's central bank has reiterated in recent weeks that it
would take the necessary measures to bring inflation back to the
official target in 2017, signaling it might raise interest rates
from an already-high 14.25 percent even with the economy in its
deepest recession in a generation.
    Yields on interest rate futures <0#2DIJ:> rose on Friday as
traders added bets on rate hikes in 2016.
    Much of the mid-December price increase was caused by rising
food prices, thanks in part to heavy rainfall brought by El
Nino. Food prices rose 2.02 percent in the month to
mid-December, up from 1.05 percent in the previous month, with
prices of perishable vegetables such as onions and potatoes
rising the most, according to IBGE.
    High inflation has hurt not only consumer confidence, but
also the popularity of President Dilma Rousseff, threatened with
a possible impeachment. 
    Although the current spike remains milder than past
hyperinflation, it has been accompanied by the worst recession
in decades, with an expected economic contraction of nearly 4
percent this year and more than a million of lost jobs.
    A separate report by the central bank on Friday showed
economic activity fell in October for an eighth
    Below is the result for each price category:    

                               mid-Decemb  mid-Novemb
                               er          er
 - Food and beverages          2.02        1.05
 - Housing                     0.69        0.74
 - Household articles          0.60        0.07
 - Apparel                     0.73        0.72
 - Transport                   1.76        1.45
 - Health and personal care    0.61        0.66
 - Personal expenses           0.56        0.37
 - Education                   0.32        0.03
 - Communication               0.87        1.04
 - IPCA-15                     1.18        0.85
 (Reporting by Silvio Cascione, editing by Larry King)