UPDATE 1-Brazil's inflation jumps unexpectedly to 12-year high
(Adds table, market reaction, background) By Silvio Cascione BRASILIA, Feb 23 (Reuters) - Brazil's inflation rate rose unexpectedly in the month to mid-February to a new 12-year high, adding to fears that the central bank will fail to meet its target for a second straight year without a new round of interest rate hikes. Consumer prices as measured by the IPCA-15 index rose 1.42 percent in the month to mid-February, above all forecasts in a Reuters poll and up from 0.92 in mid-January, government statistics agency IBGE said on Tuesday. The 12-month inflation rate rose to 10.84 percent, the highest since November 2003, from 10.74 percent in mid-January. Despite a year-old recession, which has progressively worsened, and double-digit interest rates, Brazil's inflation remains one of the highest among major world economies. Two-thirds of the mid-February monthly inflation rate were caused by higher food, education and transport prices. Prices of staples such as carrots, onions and tomatoes jumped more than 10 percent due to heavy rainfall and transportation costs rose more than 5 percent after many cities increased bus fares. Schools also jacked up tuition at the beginning of the academic year based on last year's inflation rate of 10.7 percent. The high level of price indexation after several episodes of hyperinflation until 20 years ago helps explain why inflation remains high despite the recession, economists say. Inflation is expected to slow down in coming months as the impact of many increases in taxes and utility rates by President Dilma Rousseff's government last year starts to fade. However, most economists are skeptical about the likelihood of inflation falling to the government's target of 4.5 percent without further interest rate hikes by the central bank and structural reforms to reduce government spending. Yields on short-dated interest rate futures rose <0#2DJI:> as traders added bets on rate hikes from the current 14.25 percent, a nine-year high. Below is the result for each price category: Mid-February mid-January - Food and beverages 1.92 1.67 - Housing 0.40 0.57 - Household articles 0.86 0.48 - Apparel 0.14 0.49 - Transport 1.65 0.87 - Health and personal care 1.04 0.66 - Personal expenses 0.93 1.00 - Education 5.91 0.28 - Communication 0.91 0.11 - IPCA-15 1.42 0.92 (Reporting by Silvio Cascione; Editing by Chizu Nomiyama)
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