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