May 6, 2016 / 1:32 PM / 2 years ago

UPDATE 1-Brazil's inflation falls less than expected in April

(Adds comments, market reaction, details)
    By Silvio Cascione
    BRASILIA, May 6 (Reuters) - Brazil's 12-month inflation rate
slowed less than expected in April as the government allowed
medicine prices to rise, adding to signs that the central bank
could wait longer before cutting interest rates to counter a
deep recession.
    Consumer prices as measured by the benchmark IPCA index
 rose 9.28 percent in the 12 months through April,
down from an increase of 9.39 percent in the previous month but
above forecasts for a 9.20 percent rate in a Reuters poll.
    Prices rose 0.61 percent in April from March, up from an
increase of 0.43 percent in the previous month, government
statistics agency IBGE said.
    Yields on interest rate futures <0#2DIJ:> rose after the
data as traders saw a smaller likelihood of interest rate cuts
by the central bank at its next meeting in June.
    The central bank targets annual inflation at 4.5 percent, a
goal last achieved in August 2010. In minutes published on
Thursday, it said it would not lower interest rates from nearly
10-year highs until inflation expectations fall to the target.
    Brazil's inflation rate has eased off 12-year highs as a
deep recession entered its second year. Economists in a weekly
central bank poll forecast the benchmark Selic rate 
could be lowered to 13.25 percent by year-end, from 14.25
percent currently. 
    Prices of medicines rose 6 percent in April from March,
offsetting a decline in electricity rates. In keeping with their
recent upward trend, food prices rose more than 1 percent.
    "We suspect food inflation is now close to peaking, but this
component of the index basket is notoriously difficult to
forecast," wrote Neil Shearing, chief emerging markets economist
with Capital Economics.
    On a 12-month basis, the increase in services prices slowed
for another month to 7.36 percent from 7.51 percent in March,
according to Banco Fator calculations. 
     Below are month-to-month changes for each price
                               April        March     
 - Food and beverages          1.09         1.24     
 - Housing                    -0.38        -0.64      
 - Household articles          0.26         0.70     
 - Apparel                     0.40         0.69     
 - Transport                   0.03         0.16     
 - Health and personal care    2.33         0.78     
 - Personal expenses           0.23         0.60     
 - Education                   0.20         0.63     
 - Communication               1.47        -1.65     
 - IPCA                        0.61         0.43     
 (Reporting by Silvio Cascione; Editing by Lisa Von Ahn; Editing
by Lisa Von Ahn)
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