Reuters: US Dollar Report: UPDATE 1-Brazil inflation rises 0.39 pct in month to mid-August

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UPDATE 1-Brazil inflation rises 0.39 pct in month to mid-August Aug 22nd 2012, 12:30 Wed Aug 22, 2012 8:30am EDT * IPCA-15 price index up 0.39 percent, forecast 0.36 percent * Trailing 12-month inflation rises to 5.37 percent By Silvio Cascione SAO PAULO, Aug 22 (Reuters) - Inflation in Brazil rose slightly more than expected in the month to mid-August, as the fading effect of tax breaks on automobiles failed to compensate for higher food and services costs. Brazil's benchmark IPCA inflation index rose 0.39 percent in the month to mid-August, slightly above the median of analysts' forecasts, government statistics agency IBGE said on Wednesday. In the month to mid-July, the index rose 0.33 percent The index had been expected to rise 0.36 percent in the month to mid-August, according to the median forecast of 21 economists surveyed by Reuters. Estimates for the IPCA increase ranged from 0.31 percent to 0.43 percent. Transportation prices remained unchanged, after declining 0.59 percent in the month to mid-July. Car prices had fallen in previous months after the government offered tax breaks to boost automobile sales. Food prices rose 0.76 percent after a 0.88 percent gain in the previous reading. Grain and soybean prices have jumped in global markets as the United States struggles with its worst drought in over 50 years. Ba d weather in local producer areas has also boosted prices of perishable items such as tomatoes and carrots. Personal expenses such as housekeepers' salaries also spurred inflation, gaining 0.52 percent from 0.37 percent in mid-July. Inflation in the 12 months through mid-August rose to 5.37 percent from 5.24 percent in the year to mid-July. Although annual inflation remains within the government's target of 4.5 percent plus or minus two percentage points, the rise is at odds with the central bank's long-standing view that consumer inflation would fall to the target mid-point by year-end. Central bank President Alexandre Tombini on Friday reiterated that 12-month inflation was moving toward the center of the target, but said that process was not linear. Economists in a central bank poll published on Monday raised their forecasts for 2012 inflation for the sixth straight week. The debate is important in determining market expectations for interest rates through the rest of the year. A 0.5 percentage point rate cut is widely expected for the Aug. 29 meeting, but traders and analysts dissent about ensuing moves. Brazil's benchmark Selic rate is currently at a record low 8 percent. Link this Share this Digg this Email Reprints

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