On a monthly basis, consumer prices rose at a slower pace of 0.41% in August than 0.43% in July, said the Wednesday release from the stats office IBGE.

Food prices rose 0.88% month-on-month, slightly down from a gain of 0.91% in July. The rise in food costs accounted for nearly half of the headline index gain. Housing costs moved up 0.22%. Prices of household articles were higher by 0.4% compared to July, and transportation costs were up by 0.06%, data showed. Costs of health and personal care accelerated to a rise of 0.53% in August from a gain of 0.36% in July.

The rise in food prices caused by unfavourable weather in producing areas in Brazil and in the United States and was also the main contributor to August's inflation.

Although inflation remains within the government's target of 4.5% plus or minus 2 percentage points, some analysts fear an expected rebound in economic activity and mounting pressures in food costs may push the consumer prices index close to or beyond the target ceiling next year.

The central bank chief, Alexandre Tombini, has been saying that inflation would eventually converge to the mid-point of the target range, allowing for lower borrowing costs. But analysts expect inflation to stay around 5.2% through this year and accelerate to 5.5% next year, according to a weekly central bank survey.

Brazil's historically low investment rates mean Latin America's largest country can't grow too fast without fostering inflation. Investment equalled just 17.9% of GDP in the second quarter, the lowest ratio among major Latin American economies, according to Goldman Sachs.

MercoPress