September 22, 2016 / 1:07 PM / 2 years ago

UPDATE 1-Brazil's inflation eases, bolstering case for rate cut

(Adds details, market reaction)
    By Silvio Cascione
    BRASILIA, Sept 22 (Reuters) - Brazil's inflation rate eased
more than expected in mid-September as food prices fell,
underscoring bets on an imminent interest rate cut by the
central bank.
    Consumer prices as measured by the IPCA-15 index
 rose 0.23 percent in the month to mid-September,
down from 0.45 in the previous month, government statistics
agency IBGE said on Thursday. The index had been expected to
rise 0.35 percent, according to a Reuters poll.
    In the 12 months through mid-September, consumer prices rose
8.78 percent, down from 8.95 percent a month
before, IBGE said.
    Although the 12-month inflation rate remained far above the
official 4.5 percent target, the fast decline added to signs
that companies are increasingly refraining from raising prices
in the midst of a severe recession. 
    Yields on interest rate futures <0#2DIJ:> were down,
signaling a 90-percent likelihood of a rate cut on October 19 by
the central bank. The bank has held its benchmark rate steady at
14.25 percent, its highest in a decade, but signaled it could
start easing soon if inflation expectations fell. 
    Food prices edged 0.01 percent down in the month to
mid-September after a 0.78 percent increase in mid-August. Food
prices had been rising at a surprisingly fast rate in previous
months, partly due to bad crop weather.
    Transportation and communication prices also dropped, while
the cost of personal expenses and healthcare rose.    
                             Mid-Septe  mid-Aug
                                  mber      ust
 - Food and beverages            -0.01     0.78
 - Housing                        0.48    -0.02
 - Household articles             0.25     0.34
 - Apparel                        0.49    -0.13
 - Transport                     -0.10     0.10
 - Health and personal care       0.53     0.87
 - Personal expenses              0.60     0.85
 - Education                      0.25     0.90
 - Communication                 -0.01     0.01
 - IPCA-15                        0.23     0.45

 (Reporting by Silvio Cascione; Editing by Bernadette Baum)
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