UPDATE 2-Brazil's inflation remains within target range in mid-August

miércoles 20 de agosto de 2014 09:56 GYT
 

(Adds comment from economist, background on election)
    By Silvio Cascione
    BRASILIA, Aug 20 (Reuters) - Brazil's inflation remained
within the official target range in mid-August as food and
clothing prices dropped, sparing President Dilma Rousseff
potential embarrassment in a key issue for her re-election
campaign.
    Consumer prices in Brazil rose 6.49 percent in
the 12 months to mid-August, a whisker below the 6.5 percent
ceiling of the central bank's inflation target, government
statistics agency IBGE said on Wednesday.
    The IPCA-15 inflation index rose 0.14 percent
from mid-July, down from 0.17 percent in the prior month and in
line with market expectations in a Reuters poll.
    Prices have risen less than expected in recent months, in
part because Brazil's sluggish economy has helped reduce
consumer and industrial demand. Food and clothing prices dropped
in mid-August as well as hotel prices, offsetting the impact of
an increase in electricity costs, IBGE said.
    Although economists say inflation remains high for an
economy so close to a recession, the numbers suggest consumer
prices are now less of a problem than at the beginning of the
year. Back then, a sharp increase in food costs dented
Rousseff's popularity and dominated public debate for months
just as the campaign for the Oct. 5 election started to heat up.
    The presidential race turned upside down last week with the
death of presidential candidate Eduardo Campos in a plane crash.
According to a poll on Monday, the accident raised the odds of a
second-round run-off in late October in which Rousseff would
probably face one of her two strongest opponents - Aecio Neves
or Marina Silva.
    Brazil's inflation is expected to end 2014 at 6.25 percent,
according to a weekly central bank poll of economists. It will
probably remain around that level next year, they say, because
of expected increases in government-regulated prices such as
gasoline and electricity rates.
    "This is the most likely risk for inflation this year and in
early 2015, regardless of which candidate wins the election,"
said José Francisco Gonçalves, chief economist at Banco Fator,
in a research note. "Inflation remains uncomfortably near the
inflation target (ceiling). This month's lower result should not
be treated with too much optimism."
    Brazil's inflation target is 4.5 percent, with a tolerance
margin of two percentage points.
                
    Below is the result for each price category:    

                                   August        July
 - Food and beverages               -0.32       -0.03
 - Housing                           1.44        0.48
 - Household articles                0.41        0.66
 - Apparel                          -0.18        0.00
 - Transport                         0.20       -0.85
 - Health and personal care          0.55        0.52
 - Personal expenses                -0.67        1.74
 - Education                         0.42       -0.07
 - Communication                    -0.84       -0.10
                                                     
 - IPCA-15                           0.14        0.17
  

 (Reporting by Silvio Cascione; Editing by W Simon, Chizu
Nomiyama and Meredith Mazzilli)