UPDATE 2-Brazil inflation near target ceiling in 2012, and rising
* IPCA index rises 0.79 pct in Dec from Nov, above forecasts
* Transportation, tobacco, food prices push up index
* 2012 inflation of 5.84 percent falls within target range
SAO PAULO, Jan 10 (Reuters) - Brazil's consumer inflation rate closed 2012 n ear the ceiling of the g overnment's t arget range d espite an economy that barely grew, s uggestin g p rice pressure wil l get even more intense if activity picks up as expected this year. Consumer inflation last year reached a higher-than-expected 5.84 percent, government statistics agency IBGE said on Thursday, near the top of the official target range of 4.5 percent plus or minus 2 percentage points and down from 6.5 percent in 2011. I nflation was just one factor contributing to a disap p ointing year for Brazil's economy, which is expected to have grown less than 1 percent in 2012 despite record-low interest rates and wave after wave of stimulus measures from President Dilma Rousseff's government. Additional inflation pressure could be on the horizon as Rousseff, in a bid to boost growth, seeks to maintain interest rates at current levels while relaxing fiscal responsibility rules that tightly regulate government spending. Adding to worries, a historic drought will likely increase e nergy g eneration costs and could lead to higher electricity prices for consumers, despite government assurances that energy rates will fall by 20 percent and contribute to a hal f a percentage point redu ction in annu al inflation in 2013. "The year ended with a very deteriorated inflation scenario and this year begins with a lot of worry," said Newton Rosa, chief economist with SulAm e rica Investimentos in Sao Paulo. Rising consumer prices in Brazil have defied an easing trend in Latin America as higher salaries and increased services costs offset the impact of the recent global economic slowdown on prices of manufactured goods. Brazil has not posted full-year inflation below the center of the target range since 2009 and its trailing 12-month figures have remained above 4.5 percent for more than two years. December's figures suggest no let-up in price pressure , with tr ailing 12-month inflation accelerati ng for the s ixth straight month. Brazil's benchmark IPCA consumer price index rose a faster-than-expected 0.79 percent in December from the previous month, IBGE said, up from a 0.60 percent advance in November. Even with rising inflation, the central bank slashed interest rates 10 times between August 2011 and October 2012 to a record low of 7.25 percent to stimulate an economic rebound. It held rates in November, and is widely expected to do so again next week.
"Low interest rates are a hallmark for the government and they won't let go of that unless there is an urgent need to do so," said Silvio Campos, an economist with Tendencias Consultoria in Sao Paulo. "Yes, inflation is worrying and it's negative, but raising rates won't be their first option," Campos added, pointing to possible alternatives such as macroprudential measures. Central Bank President Alexandre Tombini said on Thursday that wh ile pr ice increases are likely to stoke inflation in Brazil in the short term, th e consumer price index should ease throughout 2013. On previous occasions, Tombini had reiterated that inflation would fall towards the center of the target range, a phrase he omitted in Thursday's statement. A weekly central bank poll of economists released Monday shows consumer inflation is expected to ease slightly in 2013 to 5.49 percent, which would probably allow interest rates to remain at their current level through the year. Yields on interest rate futures rose after the inflation numbers were released, however, suggesting traders saw a lower probability of that happening. Personal expenses, food and transportation prices contributed most to December's inflation increase. Transportation prices rose 0.75 percent in December, up from an increase of 0.68 percent in November, due to higher airfares. Food inflation accelerated to 1.03 percent from 0.79 percent in November, and personal expenses prices rose 1.6 percent. Below is the result for each price category:
Dec Nov- Food and beverages 1.03 0.79- Housing 0.63 0.64- Household articles 0.27 0.47- Apparel 1.11 0.86- Transport 0.75 0.68- Health and personal care 0.40 0.32- Personal expenses 1.60 0.53- Education 0.19 0.05- Communication 0.03 0.31