January 23, 2018 / 12:04 PM / a year ago

UPDATE 1-Brazil inflation rises to targeted range in mid-January

 (Recasts with additional information, context)
    By Bruno Federowski
    BRASILIA, Jan 23 (Reuters) - Brazil's inflation rate
accelerated in mid-January back to within the official targeted
range for the first time in six months, supporting expectations
of a final interest rate cut next month.
    Consumer prices tracked by the benchmark IPCA index rose
3.02 percent in the 12 months through mid-January, state
statistics agency IBGE said on Tuesday.             
    The reading undershot the median 3.07 percent estimate of
economists in a Reuters survey, largely due to lower power rates
as heavier-than-expected rains boosted hydropower generation.
    Still, a strong rise in food prices suggested that a
months-long period of food deflation would not stretch into
    Higher food prices accounted for nearly half of the 0.39
percent monthly increase in the IPCA index, IBGE said.
Economists expected a 0.44 percent rise.             
    For the first time ever, inflation ended 2017 below the
bottom end of the central bank's target range, which is 4.5
percent plus or minus 1.5 percentage points, as a record harvest
pushed down food prices.
    The January upswing in food inflation should bolster
expectations that inflation will edge back toward the mid-point
of the official target in coming months.
    But the resurgence of inflation is likely to be gradual amid
double-digit unemployment rates and ample idle capacity in much
of the economy. A central bank survey of economists put the 2018
inflation rate at 4.25 percent, below the middle of the target.
    That should keep the bank on track to cut its benchmark
Selic interest rate by a final 25 basis points in February to an
all-time low of 6.75 percent.
    The bank has cut rates by 725 basis points since October.
Interest rate futures indicate investors expect a 25 basis-point
reduction in February, with a minority of traders banking on an
additional cut in March.          

 (Reporting by Bruno Federowski; Editing by Bernadette Baum)
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