Brazil mid-November inflation slows below target's midpoint

By Bruno Federowski

BRASILIA (Reuters) - Lower fuel costs likely helped to bring Brazil's mid-November inflation rate back below the official target's midpoint, the latest Reuters poll shows, bolstering the view that a recent price spike was more a blip than a consistent upward trend.

That is likely to allow the central bank to take its time before raising interest rates from all-time lows, maintaining support for a still-fragile economic recovery.

Consumer prices tracked by the benchmark IPCA index probably rose 4.44 percent in the 12 months through mid-November, according to the median of 15 forecasts compiled by Reuters, down from a 4.56 percent end-October rate.

The central bank targets a 4.5 percent year-end rate for 2018 and 4.25 percent for 2019, plus or minus 1.5 percentage points.

Economists at Barclays expect inflation to decelerate even more by year-end, pushed down by lower fuel and electricity costs. Still, food prices should remain high, in line with a trend seen throughout the year.

Food and energy prices are notoriously volatile categories that largely fall out of the central bank's control. When stripped of volatile items, so-called core inflation has hovered around 3.5 percent, suggesting the central bank has no reason to rush.

The IPCA index, scheduled for Friday at 9:00 a.m. local time (1100 GMT), likely rose 0.24 percent from the month before.

Widespread unemployment amid an underwhelming economic recovery has kept a lid on price hikes. Meanwhile, the victory of far-right lawmaker Jair Bolsonaro in the presidential election dispelled concerns over a potential currency selloff that could boost inflation.

The central bank last month kept the benchmark Selic rate at a record-low 6.50 percent and acknowledged reduced upward risks to inflation. In the minutes of that meeting, which took place just after the election, policymakers said inflation would likely peak in the second quarter of 2019 before easing towards its targets.

(Reporting by Bruno Federowski; Editing by Susan Thomas)

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