By Rogerio Jelmayer

SAO PAULO--Consumer-price gains in Brazil's largest city decelerated last year as increases in important categories eased, signaling a reduction of inflationary pressures during the country's economic recession.

The consumer-price index in Sao Paulo rose 6.54% last year, compared with an advance of 11.07% in 2015, Fipe research foundation said Wednesday. Fipe is affiliated with the University of Sao Paulo.

Despite the slowdown, the reading came in above market forecasts of a CPI gain in the 6.13%-6.47% range.

Food prices, which carry the greatest weight in the index, rose 7.54% in 2016, compared with a rise of 11.43% in 2015.

Housing-related costs--which include electricity, water and sewage fees--rose 4.73% last year, compared with an increase of 13.38% in the previous period. Transportation costs picked up 5.04% last year, versus a rise of 11.14% in 2015.

For December, consumer prices rose 0.72% from a month earlier, compared with an increase of 0.15% in November. The figure was also above market forecasts of an increase between 0.33% and 0.65%.

The country's statistical bureau, the IBGE, is scheduled to publish consumer inflation data for Brazil for 2017 on Jan. 11.

Inflation is one of the challenges confronting Brazil's government as it grapples with the weak economy. Gross domestic product is projected to have contracted 3.5% last year, according to the country's finance ministry.

At the end of November, the Brazilian central bank reduced its Selic base rate to 13.75% from 14%. Economists expect the bank to continue its cycle of reduction in the coming months.

Write to Rogerio Jelmayer at rogerio.jelmayer@wsj.com

(END) Dow Jones Newswires

January 04, 2017 04:43 ET (09:43 GMT)

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