Brazil’s broadest measure of inflation in June eased from the previous month as iron ore prices rose at a slower pace and food prices fell.

The Getulio Vargas Foundation said that consumer, construction and wholesale prices as measured by the IGP-M index rose 0.85% in June, higher than the median 0.80% forecast of 30 economists surveyed by Bloomberg. The index climbed 1.19% in May.

The wholesale component, which has a 60% weighting in the IGP-M, rose 1.09% during the month, led by a 23% rise in iron ore prices. This was less than half the 49.76% increase in iron ore prices in May after Vale SA raised its quarterly contract prices in response to surging demand for steel from China.

The report said that consumer prices fell 0.18%, led by a 1.36% fall in food prices.

Mr Newton Rosa chief economist at Sao Paulo based SulAmerica Investimentos said that “The main cause of the increase we have seen in the IPG-M in the last two months is iron ore, because of the rise in Vale’s contract price. But now this pressure is fading, and food prices are helping to keep IGP-M inflation down.”

Mr Rosa said that today’s number was in line with market expectations, and so neutral for the bond market and the central bank.

According to the median forecast in a central bank survey of about 100 economists published the IGP-M index is up 5.17% from a year ago.

The survey found that central bank will raise the benchmark interest rate to 11% at its July 20 to July 21 meeting, as 2010 growth expectations increased for a 15th straight week.

(Sourced from Bloomberg)