UPDATE 2-World Cup pushes Brazil inflation to target ceiling in June

martes 8 de julio de 2014 09:58 GYT
 

(Adds comment, market reaction)
    By Silvio Cascione
    BRASILIA, July 8 (Reuters) - Brazil's inflation rate hit the upper limit of
the government's target for the first time in a year in June after airlines and
hotels jacked up fares for soccer's World Cup.
    Consumer prices as measured by the IPCA index rose 6.52 percent
in the 12 months through June, reaching the top end of the central bank's target
of 4.5 percent plus or minus two percentage points. 
    The IPCA index rose 6.37 percent in the year through May.
    The numbers put the spotlight back on one of Brazil's biggest economic
problems after nearly one month of soccer revelry. Stubbornly high inflation has
dented confidence and held back economic growth, which is slowing to a near
halt.
    "No doubt that the World Cup had some impact, but we can't put all the blame
on it," said Luciano Rostagno, chief strategist at Banco Mizuho in Sao Paulo.
"Inflation will subside a bit after the Cup, but will probably stay close to the
target ceiling this year and next even as the economy grows about 1 percent
only."
    On a monthly basis, the IPCA index rose 0.40 percent, in line
with the 0.39 percent median forecast of 28 economists. That was the highest
rate for June since 2008.
    Airfares soared 21.95 percent in June from May, and hotel fares jumped 25.33
percent. Together, both items accounted for half of the monthly inflation rate,
IBGE said.
    Three measures of core inflation also rose, according to calculations by
Banco Fator, pointing to underlying price pressures that have challenged the
central bank even after nine consecutive interest rate increases recently.    
    President Dilma Rousseff's struggle to curb price rises will probably be a
hot topic in the run-up for October's election, in which she will seek a second
four-year term.
   
    The central bank has reiterated that the policy moves have yet to take
effect and will help lower inflation next year, but economists predict prices
will remain far from the 4.5 percent target beyond 2015 if the bank does not
raise rates further.
    Yields on interest rate futures <0#2DIJ:> were little changed as traders
stuck to bets on stable rates throughout 2014. Volumes were thin as Brazil
focused on the upcoming World Cup semi-final against Germany, at 2000 GMT.
    In welcome news for Rousseff, food prices, the main inflation driver earlier
this year after a drought hit Southern Brazil, dropped 0.11 percent in June from
May.
    While many economists say inflation has already breached the government's
target, the central bank only includes the first decimal point in its measure.
    Below is the result for each price category:
    
                                     June         May
 - Food and beverages               -0.11        0.58
 - Housing                           0.55        0.61
 - Household articles                0.38        1.03
 - Apparel                           0.49        0.84
 - Transport                         0.37       -0.45
 - Health and personal care          0.60        0.98
 - Personal expenses                 1.57        0.80
 - Education                         0.02        0.13
 - Communication                    -0.02        0.11
                                                     
 - IPCA                              0.40        0.46
 
 (Reporting by Walter Brandimarte and Felipe Pontes; Writing by Silvio Cascione;
Editing by W Simon and Lisa Von Ahn)