May 20, 2016 / 1:23 PM / 2 years ago

UPDATE 1-Brazil's inflation tops expectations in mid-May

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    BRASILIA, May 20 (Reuters) - Brazil's 12-month inflation
rate rose more than expected in mid-May and edged closer to 10
percent again on higher food and medicine prices, reducing the
likelihood of interest rate cuts in coming months, government
data showed on Friday.
    Consumer prices rose 9.62 percent in the 12 months through
mid-May, up from 9.34 percent in mid-April and
topping all expectations in a Reuters poll.
    Inflation remained well above the official target of 4.5
percent, a goal last achieved in August 2010. Yields on
short-dated interest rate futures rose slightly <0#2DIJ:> as
traders pared bets on upcoming rate cuts.
    On a monthly comparison, the IPCA-15 index rose
0.86 percent in mid-May, up from 0.51 in mid-April. 
    The government last month allowed medicine prices to rise up
to 12.5 percent, the biggest increase in 10 years, after the
currency weakened sharply and made imports more expensive. 
    Food prices also had a strong increase in mid-May, while
lower ethanol fuel prices and airfares helped limit inflation in
the month, IBGE said.
    Economists expect prices to fall towards the official goal
this year as a deep recession curbs consumption. However, the
expected inflation drop is unlikely to be fast enough to allow
room for interest rate cuts at the next central bank policy
meeting in June.
    According to a weekly central bank poll of about 100
economists, inflation is set to drop to 7 percent by year end
and 5.5 percent in 2017. Interest rates, currently at 14.25
percent, would probably be reduced to 13 percent until December.
        Below is the result for each price category:
                                  Mid-May   Mid-April
 - Food and beverages                1.03        1.35
 - Housing                           0.99       -0.41
 - Household articles                0.55        0.28
 - Apparel                           0.72        0.49
 - Transport                        -0.30        0.18
 - Health and personal care          2.54        1.32
 - Personal expenses                 0.81        0.36
 - Education                         0.29        0.15
 - Communication                     1.26       -0.96
 - IPCA                              0.86        0.51
 (Reporting by Silvio Cascione; Editing by Meredith Mazzilli)
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