UPDATE 1-Brazil annual inflation rate hits lowest in a year in mid-June

martes 21 de junio de 2016 08:42 GYT

(Adds table, market reaction)
    By Silvio Cascione
    BRASILIA, June 21 (Reuters) - Brazil's annual inflation rate
slowed more than expected in mid-June and fell below 9 percent
for the first time in a year, renewing hopes of interest rate
cuts amid a harsh recession.
    Consumer prices, as measured by the IPCA-15 index, rose 8.98
percent in the 12 months through mid-June, down from 9.62
percent in mid-May, statistics agency IBGE said on Tuesday.
    Prices rose 0.40 percent from mid-May to
mid-June, below the median forecast of 0.52 percent in a Reuters
poll and easing from 0.86 in the previous month.
    Food inflation slowed sharply from May and transportation
prices fell, mostly due to a 6-percent drop in the cost of
ethanol fuel.
    Higher water and sewage utility rates spurred a rise in
housing costs. 
    Following the release of the inflation data, yields on
interest rate futures <0#2DIJ:> fell as traders perceived a
greater prospect of interest rate cuts by the central bank in
coming months. 
    The official inflation target is Brazil is 4.5 percent, a
goal last achieved in August 2010. The central bank has kept its
benchmark interest rate at its highest in nearly 10 years, at
14.25 percent, in a bid to slow the 2016 inflation rate at least
to the top end of its tolerance range, at 6.5 percent.
    Low investment rates, hefty government spending and a surge
in subsidized credit have fueled price increases in Latin
America's largest economy, even as it went through its worst
recession in generations.
                              Mid-May  Mid-June
 - Food and beverages            1.03      0.35
 - Housing                       0.99      1.13
 - Household articles            0.55      0.57
 - Apparel                       0.72      0.42
 - Transport                    -0.30     -0.69
 - Health and personal care      2.54      1.03
 - Personal expenses             0.81      0.89
 - Education                     0.29      0.06
 - Communication                 1.26      0.01
 - IPCA-15                       0.86      0.40
 (Reporting by Silvio Cascione)