UPDATE 1-Brazil's mid-October inflation remains above target ahead of election

martes 21 de octubre de 2014 07:39 GYT

(Adds table, background, market reaction)
    By Silvio Cascione
    BRASILIA, Oct 21 (Reuters) - Brazil's annual inflation rate
remained above the official target in mid-October, providing
ammunition to opposition candidate Aecio Neves just days before
a tightly contested presidential election.
    Consumer prices rose 6.62 percent in the 12 months through
mid-October, according to the IPCA-15 price index
released on Tuesday by statistics agency IBGE.
    The inflation rate was slightly below market consensus of
6.65 percent in a Reuters poll, but remained above the 6.5
percent ceiling of the government's target range. 
    Prices rose 0.48 percent from mid-September, up
from 0.39 percent in the previous month.
    Inflation is a politically sensitive issue in a country
traumatized by runaway prices in the past. Although price rises
are now much better contained than they were 20 years ago,
higher inflation contributed toward tarnishing the popularity of
reelection candidate Dilma Rousseff.
    The government has blamed the recent inflation spike partly
on higher beef prices, which rose 2.4 percent in mid-October.
Beef prices rose sharply due an increase in exports to Russia. 
    Neves responded with a TV ad saying the government wanted
Brazilians to buy chicken instead of beef. 
    "Are you going to replace beef for eggs? No, I will change
the government," the ad says.    
    In the full month of September, Brazil's annual inflation
rate hit the highest in nearly three years at 6.75 percent.
    Recent polls showed Rousseff gaining momentum in the
election campaign but still locked in a dead heat with Neves
ahead of Sunday's runoff vote. 
    Stubbornly high inflation has raised prospects of interest
rate increases next year. Yields on interest rate futures
<0#2DIJ:> rose sharply on Tuesday.
                               October    September
 - Food and beverages          0.69       0.28
 - Housing                     0.80       0.72
 - Household articles          0.13       0.43
 - Apparel                     0.70       0.17
 - Transport                   0.25       0.45
 - Health and personal care    0.37       0.30
 - Personal expenses           0.40       0.31
 - Education                   0.08       0.20
 - Communication               0.00       0.56
 - IPCA-15                     0.48       0.39

 (Reporting by Silvio Cascione; Editing by Chizu Nomiyama)