February 23, 2018 / 12:39 PM / 25 days ago

UPDATE 1-Electricity prices keep a lid on Brazil February inflation

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    SAO PAULO, Feb 23 (Reuters) - Inflation in Brazil came in
close to analyst expectations in mid-February, holding below the
bottom end of the official targeted range, and sustaining bets
on an interest rate cut next month.
    Consumer prices tracked by the benchmark IPCA index rose
2.86 percent in the twelve months through mid-February,
government statistics agency IBGE said on Friday, in line with a
forecast of economists polled by Reuters.             
    Lower energy tariffs kept a lid on price hikes after
unexpectedly strong rains boosted hydropower generation,
offseting a big jump in education and transport costs.
    Underlying inflation trends remained muted due to
double-digit unemployment rates and widespread idle capacity
among companies.
    The IPCA index rose 0.38 percent in mid-February from the
month before, slightly below the consensus analyst estimate of
0.42 percent.             
    The reading shows how the central bank is struggling to lift
inflation back to its targeted range, of 4.5 percent plus or
minus 1.5 percentage points, as the economy recovers from its
deepest recession in decades.
    This month, the bank cut interest rates to an all-time low
of 6.75 percent and said it would keep them there if the economy
evolved as expected.
    But two straight downward inflationary surprises have
spurred trader speculation that the bank could cut rates by an
additional 25 basis points in March. This was made more likely
after the minutes of the bank's last policy meeting showed
policymakers were divided over how strongly to signal the end of
monetary easing.

 (Reporting by Bruno Federowski and Gram Slattery; Editing by
Bernadette Baum)
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