June 8, 2016 / 1:22 PM / 2 years ago

UPDATE 1-Brazil inflation quickens to highest for May since 2008

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    By Silvio Cascione
    BRASILIA, June 8 (Reuters) - Consumer prices in Brazil rose
in May at their fastest pace for the month since 2008, slightly
surpassing market expectations and reinforcing signs that the
central bank will have scant room for interest rate cuts in the
short term.
    Prices as measured by the benchmark IPCA index,
rose 0.78 percent in May, up from 0.61 percent in April and
above market forecasts for a 0.75 percent increase in a Reuters
poll, government statistics agency IBGE said on Wednesday.
    Prices rose 9.32 percent in the 12 months through May, up
from an increase of 9.28 percent in the previous month. That
annual inflation rate is more than twice as high as the official
target of 4.5 percent, a goal last achieved in August 2010.
    Housing costs rose sharply in May as water, sewage and
electricity rates went up. Medicine prices also led inflation
higher, as expected, after the government allowed drug costs to
rise at their fastest pace in 10 years due to a sharp currency
    Stubborn inflation has prompted the central bank to keep
interest rates at their highest in nearly 10 years despite one
of the worst recessions ever in Brazil. Yields on interest rate
futures rose on Tuesday <0#2DIJ:> as traders pared bets on rate
cuts in coming months, following the first remarks by incoming
central bank chief Ilan Goldfajn.
    Speaking at a Senate hearing, Goldfajn said he would seek to
"fully" comply with the bank's objective to bring inflation down
to the 4.5 percent level. Most economists have expected interest
rate cuts in the second half of the year. 
    The bank will announce later on Wednesday its last policy
decision under the leadership of its outgoing president
Alexandre Tombini, and analysts in a Reuters poll were unanimous
in predicting rates to remain on hold at 14.25 percent in an
uneventful meeting.
    Below is the result for each price category: 
                               May          April    
 - Food and beverages          0.78         1.09     
 - Housing                     1.79        -0.38     
 - Household articles          0.63         0.26     
 - Apparel                     0.91         0.40     
 - Transport                  -0.58         0.03     
 - Health and personal care    1.62         2.33     
 - Personal expenses           1.35         0.23     
 - Education                   0.16         0.20     
 - Communication               0.01         1.47     
 - IPCA                        0.78         0.61     
 (Reporting by Silvio Cascione Editing by W Simon)
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