Brazil inflation slows less than expected in mid-October

Reuters

* Consumer prices rise 5.75 pct in 12 months through mid-Oct

* Month-on-month inflation rises to 0.48 pct, food prices

jump

By Silvio Cascione

SAO PAULO, Oct 18 (Reuters) - Brazil's annual inflation

slowed less than expected in mid-October as food prices spiked,

in what could boost expectations for a more prolonged cycle of

interest rate hikes by the central bank.

Brazil's IPCA-15 inflation index rose 5.75

percent in the 12 months through mid-October, above the median

forecast of 22 analysts for an increase of 5.69 percent.

Inflation has moderated over the past few months as the

impact of a severe drought in the United States on food prices

late last year fades. In mid-September, annual inflation stood

at 5.93 percent.

In the month to mid-October, the IPCA-15 index rose 0.48

percent, accelerating from an increase of 0.27 percent in

mid-September. Analysts in a Reuters poll expected a 0.41

percent rise.

Food prices jumped 0.70 percent from mid-September, after

edging up a modest 0.04 percent in the previous month, led by

higher prices of beef, poultry, fruits and bread.

The central bank's annual inflation target is 4.5 percent,

with a tolerance band of two percentage points either way.

However, inflation is not expected to ebb to 4.5 percent

anytime over the next two years as infrastructure bottlenecks

and resilient consumer demand keeps upward pressure on prices.

This will probably encourage the central bank to raise

interest rates back to double-digit levels in its next monetary

policy meeting, in November, acoording to a growing number of

economists.

Brazil's benchmark interest rate is currently

at 9.50 percent, the highest among the world's largest

economies, after five consecutive increases since April.

Central bank policymakers say they aim to bring 2013

inflation to below the 5.84 percent rise in consumer prices in

2012. The latest forecast in a Reuters poll of 36 economists

predicted 12-month consumer inflation will end this year

slightly above that level, at 5.9 percent.

Below is the result for each price category:

October September

- Food and beverages 0.70 0.04

- Housing 0.67 0.53

- Household articles 0.97 0.52

- Apparel 0.88 0.37

- Transport 0.08 0.30

- Health and personal care 0.35 0.56

- Personal expenses 0.46 0.16

- Education 0.06 0.12

- Communication 0.03 -0.07

- IPCA-15 0.48 0.27

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