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UPDATE 1-Brazilian inflation below forecasts, hits fresh 18-year low

(Updates throughout with additional details, context) SAO PAULO, Aug 23 (Reuters) - A smaller-than-expected rise in Brazil's consumer prices in mid-August pushed annual inflation to a new 18-year low, keeping the central bank on track to cut interest rates aggressively. The IPCA-15 consumer price index fell to 2.68 percent in the 12 months through mid-August, below the 2.73 percent expected in a Reuters poll and down from 2.78 percent in mid-July, statistics agency IBGE said on Wednesday. The reading is far below the bottom end of the central bank's annual target range of 4.5 percent plus or minus 1.5 percentage point, weighed down by a deep recession and a double-digit unemployment rate. Slowing inflation in Brazil parallels weakening price pressures in developed economies, where tepid global economic growth has kept central banks on edge. Still, Brazilian consumer prices rose 0.35 percent in the month to mid-August thanks to a one-off increase in fuel taxes, as well as a regulatory decision to raise power rates as scarcer rains sapped hydroelectric generation. Economists expected a 0.40 percent monthly increase. Yields paid on interest rate future contracts fell after the release as traders increased bets that the central bank will cut the benchmark Selic rate by 100 basis points at its September meeting, which would be the fourth straight cut of that magnitude. Sharp interest rate reductions seem to be having some effect on economic activity, driving several forecasters to revise up their forecasts for Brazil's gross domestic product.

Below is the result for each price category:

(monthly percent change) Mid-August Mid-July - Food and beverages -0.65 -0.55 - Housing 1.01 0.24 - Household articles 0.21 -0.55 - Apparel -0.29 0.04 - Transport 1.35 -0.64 - Health and personal care 0.73 0.14 - Personal expenses 0.34 0.31 - Education 0.19 0.08 - Communication -0.32 0.00 - IPCA-15 0.35 -0.18

(Reporting by Bruno Federowski; Editing by Paul Simao)