UPDATE 1-Brazil annual inflation up modestly as food price gains ease
(Adds table, background) BRASILIA, May 21 (Reuters) - Brazil's annual inflation rate rose only slightly in mid-May, paving the way for the central bank to stop raising interest rates at its monetary policy meeting next week. Consumer prices as measured by the IPCA-15 price index rose 6.31 percent in the 12-month period through mid-May, nearly unchanged from the 6.28 percent rate seen at the end of April, government statistics agency IBGE said on Wednesday. The index rose 0.58 percent from mid-April, broadly in line with market expectations in a Reuters poll. While the inflation rate remains very close to the 6.5 percent ceiling of the central bank's target range, the numbers showed that a sharp increase in food prices has lost steam as the government expected. Food prices rose 0.88 percent in the month through mid-May, less than half the pace seen one month before. The sharp increase in food prices over the past few months was a key reason for the central bank to extend the series of interest rate hikes that took its benchmark Selic rate to a two-year high of 11 percent. As food inflation moderates, many economists expect the central bank to pause its rate-hiking cycle at its upcoming May 27-28 meeting. Yields on interest rate futures were slightly down, suggesting traders pared bets on an additional 25 basis-point rate increase next week. Below is the result for each price category: April May - Food and beverages 1.84 0.88 - Housing 0.58 1.19 - Household articles 0.24 0.29 - Apparel 0.37 0.67 - Transport 0.54 -0.33 - Health and personal care 0.69 1.20 - Personal expenses 0.50 0.51 - Education 0.14 0.08 - Communication -0.61 0.17 - IPCA-15 0.78 0.58 (Reporting by Silvio Cascione Editing by W Simon)
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