Brazil Sao Paulo inflation brakes in June from May

SAO PALO: Consumer prices in Sao Paulo, Brazil's largest metropolitan area, braked sharply in June from May, the latest indicator to point to a slowdown in inflation.

The IPC-FIPE index rose 0.01 percent last month, compared with an increase of 0.31 percent in May, according to the FIPE economic research institute on Monday.

The index was expected to stay flat at 0.0 percent, according to the median forecast of 10 analysts surveyed by Reuters. Estimates ranged from a drop of 0.15 percent to a rise of 0.01 percent.

Among the categories tracked, transportation and food costs dropped. Both those categories spiked earlier this year as global commodity prices rose.

The FIPE index is closely watched by economists as a pointer to trends in Brazil's benchmark IPCA inflation index, which is used by the central bank as a guide when setting interest rates.

That IPCA index has sped above a government ceiling, reaching 6.55 percent in the 12 months through May. The government is targeting inflation of 4.5 percent plus or minus 2 percentage points this year.

So far the central bank has raised interest rates four times this year by a cumulative 150 basis points, bringing the Selic rate to 12.25 percent. Analysts see at least one more rate hike on the way, as well.

Copyright Reuters, 2011