UPDATE 1-Soaring food prices drive Brazil inflation to 12-year peak
(Adds food and transportation prices, background) By Silvio Cascione BRASILIA, Feb 5 (Reuters) - Soaring food prices drove Brazil's inflation to a new 12-year high, adding to pressure on the central bank to raise interest rates despite a deep recession. Consumer prices, as measured by the benchmark IPCA index , rose 1.27 percent in January, accelerating from 0.96 percent in December, the government said on Friday. The January reading was above all analyst forecasts in a Reuters poll. Prices rose 10.71 percent in the 12 months to January, up from 10.67 percent in the year to December, to hit the highest level since November 2003. Food prices jumped 2.28 percent in January from 1.50 percent in December as a strong El Nino weather pattern caused floods and disrupted production of fresh vegetables like tomatoes and onions. It was the steepest monthly increase in food prices since December 2002. Transportation prices also rose sharply, by 1.77 percent, from 1.36 percent in December, lifted by a increase in urban bus fares and gasoline taxes, triggering violent street protests last month, especially in Sao Paulo. A separate inflation measure including wholesale prices also topped all market expectations earlier on Friday. The IGP-DI index calculated by the Getulio Vargas Foundation rose 1.53 percent in January, driven by high industrial prices as Brazilian currency, the real, trades near a record low. The price increases are much lower than in previous bouts of hyperinflation but still contributed to a sharp drop in consumer confidence and in the popularity of President Dilma Rousseff. Government officials and economists expected inflation to ease with the anticipated fading of the impact of last year's hikes in taxes and regulated utility and energy prices. Betting the recession would ease inflation, the central bank held off on raising interest rates from 14.25 percent last month , but a government source told Reuters this week the bank could resume hiking rates if inflation expectations rose. The Selic rate has nearly doubled since 2013 from a record low of 7.25 percent. Below is the result for each price category: January December - Food and beverages 2.28 1.50 - Housing 0.81 0.49 - Household articles 0.45 0.46 - Apparel -0.24 1.15 - Transport 1.77 1.36 - Health and personal care 0.81 0.70 - Personal expenses 1.19 0.57 - Education 0.31 0.22 - Communication 0.22 0.43 - IPCA 1.27 0.96 (Reporting by Silvio Cascione Editing by W Simon)
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