UPDATE 2-Brazil May inflation slows, but pressures linger

* IPCA index rises 0.43 percent in May as expected

* Smaller food price increase helps slow May inflation

* Core inflation jumps, underscores lingering pressures

* Twelve-month inflation through May dips to 5.22 percent
(Adds core inflation measure, interest rate futures)

SAO PAULO, June 9 (BestGrowthStock) – Inflation in Brazil slowed in
May from April as expected, though a jump in core prices
underscored concerns about lingering price pressures.

Policy-makers are expected to hike borrowing costs on
Wednesday to try to contain inflation in Latin America’s
largest economy, which last year left recession and surged
ahead of much of the developed world.

The benchmark IPCA consumer price index (BRCPI=ECI: ) rose
0.43 percent in May, slowing from an increase of 0.57 percent
in April, statistics agency IBGE said on Wednesday.

The index was expected to rise 0.43 percent in May,
according to the median forecast of 20 economists surveyed by
Reuters. Estimates for the IPCA’s increase ranged from 0.4
percent to 0.49 percent.

The slowdown came as food prices — which had jumped
earlier in the year on rough weather — rose 0.28 percent in
May, far less than their 1.45 percent increase in April.

Despite the lower index in May, core inflation, which
strips out food and other volatile prices, jumped to 0.59
percent from 0.45 percent in April, according to research firm
LCA. The surge in core inflation pushed yields on interest rate
futures (0#DIJ:: ) higher.

The yield on the contract due January 2012 (DIJF2: ) rose to
11.94 percent from 11.89 percent, while the yield on the
January 2011 contract (DIJF1: ) firmed to 11.05 percent from
10.99 percent on Tuesday.

ANNUAL INFLATION

Twelve-month inflation through May reached 5.22 percent,
slightly slower than the 5.26 percent through April.

Central bank policymakers use an annual inflation target as
a guide in setting the benchmark Selic interest rate. The 2010
target is 4.5 percent, plus or minus 2 percentage points.

The bank will decide on a new level for the Selic after the
close of markets on Wednesday, with most analysts surveyed by
Reuters forecasting the Selic to rise to 10.25 percent from 9.5
percent. [ID:nSPG002929]

That rate is among the highest in the world, even as
Brazil’s economy posts growth rates that put it among the
vanguard of expanding economies worldwide.

Data on Tuesday showed that the country’s economy grew a
whopping 9 percent in the first quarter over the year-ago
period, the fastest advance in at least 14 years.
[ID:nN08250176]

For more information on the IBGE May inflation report see:
http://www.ibge.gov.br/home/presidencia/noticias/noticia_visuali
za.php?id_noticia=1635&id_pagina=1

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(Reporting by Rodrigo Viga Gaier; Writing by Luciana Lopez,
Editing by W Simon )

UPDATE 2-Brazil May inflation slows, but pressures linger