UPDATE 1-Brazil's inflation slows sharply in July
(Adds market reaction, details on airfares and food prices) By Silvio Cascione BRASILIA, Aug 8 (Reuters) - Consumer prices in Brazil barely rose in July, government data showed on Friday, in surprisingly good news for President Dilma Rousseff as she seeks to reassure voters that inflation remains under control ahead of October's election. Prices as measured by the benchmark IPCA index rose just 0.01 percent from June, the slowest monthly inflation rate in four years and below all forecasts in a Reuters poll. As a result, the annual inflation rate slowed slightly to 6.50 percent in July from 6.52 percent in June, remaining at the upper limit of the official target range. The central bank targets inflation at 4.5 percent, with a tolerance margin of 2 percentage points. The numbers suggested the central bank's yearlong series of increases in interest rates, which ended in April at 11 percent , might have started to curb rising prices. Inflation, which has remained stubbornly high since Rousseff took office in 2011, is a major theme in Brazil's presidential race. Rousseff's main challenger, Aecio Neves, has narrowed her lead in recent weeks, according to polls. High prices have also dented business and consumer confidence, contributing to a sharp economic slowdown that some economists say may lead to a recession this year. Lower airfares, food and fuel prices contributed the most to tamping down July's inflation, according to statistics agency IBGE. Airfares plunged 27 percent after the soccer World Cup, while food prices fell 0.15 percent, the fourth straight month of decline. Gasoline prices declined 0.80 percent. The share of goods and services whose prices increased from June, the so-called diffusion index, dropped to 59 percent from 61 percent, according to calculations by Banco Fator, suggesting weaker price pressures. The average of the main core inflation measures also fell to 0.25 percent from 0.61 percent. The median forecast of 31 economists surveyed by Reuters for the July inflation rate was for an increase of 0.10 percent. The lowest forecast in the poll was 0.05 percent. Below is the result for each price category: July June - Food and beverages -0.15 -0.11 - Housing 1.20 0.55 - Household articles 0.86 0.38 - Apparel -0.24 0.49 - Transport -0.98 0.37 - Health and personal care 0.50 0.60 - Personal expenses 0.12 1.57 - Education 0.04 0.02 - Communication -0.79 -0.02 - IPCA 0.01 0.40 (Additional reporting by Rodrigo Viga Gaier and Felipe Pontes in Rio de Janeiro; Editing by Lisa Von Ahn)
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