UPDATE 2-Brazil's inflation overshoots estimates as airfares jump

(Recasts throughout, adds comments from finance minister and economists)

By Gabriel Araujo

SAO PAULO, Dec 28 (Reuters) - Brazil's consumer prices rose by more than expected in the month to mid-December, data from statistics agency IBGE showed on Thursday, boosted by a surge in airfares that the government described as worrying.

President Luiz Inacio Lula da Silva is on a personal quest to make air travel more affordable, but analysts are skeptical how much measures so far - including a price cap for millions of tickets - will change the situation.

"There is one item worrying us when it comes to inflation: air tickets," Finance Minister Fernando Haddad told reporters. "They rose 65% in the last four months, and they were already expensive."

Airlines say the local market reflects a global trend, as demand for air travel has rebounded after the end of pandemic lockdowns, while supply chain issues have reduced planemakers' ability to deliver new aircraft that would increase capacity.

In Latin America's largest economy, prices as measured by the IPCA-15 index rose 0.40% in the month to mid-December, up from 0.33% in the previous month and above all estimates in a Reuters poll of economists, whose median forecast was 0.27%.

The increase was driven by higher transportation prices, with a drop in fuel costs failing to offset a 9% jump in airfares, according to IBGE. Food and beverage costs were also up in the month.

That took 12-month inflation in the country to 4.72%, still below the high end of the central bank's official target range of 1.75% to 4.75% but also above market expectations of 4.59%.

"It's not broad inflation uniformly affecting people, but it does have an impact on those who use this type of transportation," Haddad said. "Airfares had a big impact on the IPCA index and inspire great caution."

RATE CUTS

Governor Roberto Campos Neto has described the ongoing 50-basis-point cuts per meeting as "appropriate" and the latest data add weight to Brazil's central bank's decision not to accelerate the pace of interest rate cuts for now.

To tame high inflation, the central bank held its benchmark rate at a six-year high of 13.75% for nearly a year following 1,175 basis points of hikes, before kicking off an easing cycle in August.

It has so far reduced rates by 200 basis points and flagged further 50 basis point cuts in each of the next two policy meetings, but Campos Neto has repeatedly said he still sees the easing cycle ending in restrictive territory.

"It's been a while since we've seen an upward surprise like this," Inter's chief economist Rafaela Vitoria said of the consumer price figures.

"But they are not a concern for the direction of monetary policy in the short term, there is plenty of room for 50-basis-point cuts in the next meetings." (Reporting by Gabriel Araujo; Editing by Steven Grattan and Barbara Lewis)