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