November 10, 2017 / 11:43 AM / a year ago

UPDATE 1-Power costs lift Brazil consumer prices by the most in 8 months

 (Updates throughout with details, context)
    By Bruno Federowski
    SAO PAULO, Nov 10 (Reuters) - High power costs lifted
Brazil's consumer prices in October by the most in eight months,
alleviating concerns that it could undershoot the official
year-end target.
    The IPCA index rose 0.42 percent from September, up from
0.16 percent the month before, government statistics agency IBGE
said on Friday.            
    Annual inflation reached 2.70 percent, still below the
bottom-end of the central bank's target range of 4.5 percent
plus or minus 1.5 percentage points but far above 18-year lows
seen earlier this year.             
    Economists polled by Reuters had forecast readings of 0.47
percent and 2.75 percent, respectively.
    Scarce rains drove regulators to hike electricity rates in a
bid to offset reduced hydropower generation. Analysts expect
power costs to remain high in coming months, driving several
forecasters to revise up their 2018 inflation forecasts.
    Meanwhile, food prices fell only 0.05 percent in October
from September, the lowest decline since April, suggesting a
months-long period of food deflation may be coming to an end.
    But the uptick in inflation in October is unlikely to
prevent the central bank from cutting interest rates to all-time
lows, as it faces subdued wage growth and abundant idle
    A weekly central bank survey of economists put the benchmark
Selic interest rate at 7 percent by year-end 2018. The top five
most precise estimates, however, expect the central bank could
cut it as low as 6.5 percent in February, after leaving the door
open for further reductions.
    Below is the result for each price category:
                              October      September 
- Food and beverages         -0.05        -0.41     
- Housing                     1.33        -0.12      
- Household articles         -0.39         0.13     
- Apparel                     0.71         0.28     
- Transport                   0.49         0.79     
- Health and personal care    0.52         0.32     
- Personal expenses           0.32         0.56     
- Education                   0.06         0.04     
- Communication               0.40         0.50     
- IPCA                        0.42         0.16     

 (Reporting by Bruno Federowski; Editing by Alison Williams)
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