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By Silvio Cascione
BRASILIA, Aug 24 (Reuters) - Brazil’s annual inflation rate remained at nearly 9 percent in mid-August, fueling doubts over the timing of interest rate cuts as policymakers struggle with a harsh recession.
Consumer prices rose 8.95 percent in the 12 months through mid-August, up slightly from 8.93 percent in mid-July, the official statistics agency IBGE said on Wednesday.
The so-called IPCA-15 consumer price index rose 0.45 percent in the month to mid-August, down from 0.54 in the previous month. The index had been expected to rise 0.47 percent, according to the median forecast in a Reuters poll.
Food prices, which had spiked in recent months due to poor crop weather, slowed their advance to 0.78 percent in mid-August from 1.45 percent in mid-July. Apparel, housing and transportation prices also eased in the month, IBGE said.
Still, yields on interest rate futures <0#2DIJ:> were mostly up, signalling a smaller likelihood of interest rate cuts by the central bank in coming months.
“While the underlying drivers of the pick-up in mid-month inflation provide some reassurance, the fact remains that policymakers will be focused squarely on the headline rate, which has edged up,” said Neil Shearing, chief emerging markets economist at Capital Economics, in a report.
The so-called diffusion index, which measures the proportion of goods and services that had price increases in the month, rose to 63.3 percent in mid-August from 57.8 percent in mid-July, according to Banco Fator estimates.
High inflation has haunted Brazil throughout the past decade and made unemployment even more painful for 11 million jobless workers. Rising costs have also cut into corporate profits and dampened investments in recent years.
The central bank has pledged to slow annual price increases at least to the 6.5 percent ceiling of its tolerance range by the end of this year as it seeks to restore investor and business confidence in Latin America’s largest economy.
The central bank’s strategy has been to keep interest rates at 14.25 percent, their highest in a decade, even as the country struggles with its worst recession in probably more than a century.
The official inflation target is 4.5 percent, a goal not achieved since August 2010 as government spending soared under the administration of suspended President Dilma Rousseff. (Reporting by Silvio Cascione; Editing by Chizu Nomiyama)