June 29 (Bloomberg) -- Brazil’s broadest measure of inflation in June eased from the previous month as iron ore prices rose at a slower pace, and food prices fell.
Consumer, construction and wholesale prices as measured by the IGP-M index rose 0.85 percent in June, higher than the median 0.80 percent forecast of 30 economists surveyed by Bloomberg. The index climbed 1.19 percent in May, the Getulio Vargas Foundation said on its website.
The wholesale component, which has a 60 percent weighting in the IGP-M, rose 1.09 percent during the month, led by a 23 percent rise in iron ore prices. This was less than half the 49.76 percent increase in iron ore prices in May, after Vale SA, the world’s biggest supplier of iron ore, raised its quarterly contract prices in response to surging demand for steel from China.
Consumer prices fell 0.18 percent, led by a 1.36 percent fall in food prices, today’s report said.
“The main cause of the increase we have seen in the IPG-M in the last two months is iron ore, because of the rise in Vale’s contract price,” said Newton Rosa, chief economist at Sao Paulo-based SulAmerica Investimentos. “But now this pressure is fading, and food prices are helping to keep IGP-M inflation down,” Rosa added.
Today’s number was in line with market expectations, and so neutral for the bond market and the central bank, Rosa said.
The IGP-M index is up 5.17 percent from a year ago. The IGP-M, which is used to calculate increases in some rents, utility contracts and school fees, will end 2010 at 9.08 percent, according to the median forecast in a central bank survey of about 100 economists published yesterday.
The central bank will raise the benchmark interest rate to 11 percent at its July 20-21 meeting, as 2010 growth expectations increased for a 15th straight week, the survey found.
Policy makers have raised Brazil’s benchmark Selic rate twice this year to 10.25 percent, from a record low 8.75 percent in March, to prevent Latin America’s biggest economy from overheating. The economy grew 9 percent in the first quarter of 2010 from the same quarter a year earlier, faster than any other Latin American economy.
The government’s benchmark IPCA price index rose 5.22 percent in May from a year earlier. Annual price increases have exceeded the government’s 4.5 percent target every month this year and are forecast to remain above that level until 2012, according to the central bank survey.
The yield on the interest rate future contract due January 2012, the most actively traded on Sao Paulo’s BM&F exchange, fell two basis points to 12.02 percent at 9:11 a.m. New York time. The real weakened 0.7 percent to 1.7933 per dollar from 1.7803 yesterday.
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