UPDATE 1-Brazil's annual inflation climbs above 8 pct in March
(Adds market reaction, details on electricity fares, background) By Silvio Cascione BRASILIA, April 8 (Reuters) - Brazil's annual inflation rate climbed above 8 percent in March though at a slower pace than expected, government data showed on Wednesday, keeping pressure on the central bank to raise interest rates further despite a broad economic slowdown. The benchmark IPCA consumer price index rose 1.32 percent in March, statistics agency IBGE said, slightly less than expectations for an increase of 1.39 percent in a Reuters poll but still climbing at its fastest pace since 2003. In the 12 months through March, consumer prices rose 8.13 percent, the highest rate since December 2003 and well above the government's 4.5 percent inflation target. Brazil's inflation rate has soared in 2015, denting President Dilma Rousseff's popularity as she opted to pass higher costs of electricity, gasoline and other regulated prices on to consumers after years of attempts to keep them low. Housing costs rose 5.29 percent in March from February alone, pushed up by a 22-percent increase in electricity rates as a severe drought affecting hydroelectric production heightened risks of energy rationing. Food prices also accelerated their advance in March to 1.17 percent from 0.81 percent in the previous month. The central bank, intent on keeping inflation expectations under control, has raised interest rates since October and is widely expected to keep lifting the key Selic rate in the coming months from the current 12.75 percent, the highest since 2009. After the March inflation rate came in lower than expected, yields on interest rate futures dropped slightly <0#2DIJ:> as traders pared bets on an aggressive cycle of rate hikes to come. Yet Brazil's yield curve still implied at least two more hikes in coming months, to 13.50 percent. The central bank's campaign against inflation is likely to starting bearing fruit next month, according to economists, who expect monthly inflation readings to ease below 1 percent. Annual inflation will probably remain close to 8 percent through this year though, and should only start to ease gradually towards 4.5 percent next year, according to market forecasts. Below is the result for each price category: March February - Food and beverages 1.17 0.81 - Housing 5.29 1.22 - Household articles 0.35 0.87 - Apparel 0.59 -0.60 - Transport 0.46 2.20 - Health and personal care 0.69 0.60 - Personal expenses 0.36 0.86 - Education 0.75 5.88 - Communication -1.16 -0.02 - IPCA 1.32 1.22 (Reporting by Silvio Cascione)
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