SAO PAULO, June 10 (Reuters) - Brazil's inflation rate

slowed more than expected in May but the 12-month gauge remained

well above the central bank's target range, data from statistics

agency IBGE showed on Tuesday.

Consumer prices as measured by the benchmark IPCA index rose

0.26% last month and 5.32% in the 12 months through May, IBGE

said, undershooting forecasts of 0.33% and 5.40% in a Reuters

poll of economists.

The data marked a decline from April's 0.43% monthly rate

and 5.53% for the 12-month reading, though the latter still

exceeded the official target of 3% plus or minus 1.5 percentage

points.

Two of the nine groups surveyed posted price decreases in

May, IBGE said, including transport as airfare and fuel costs

edged down. Food and beverage price increases, which are closely

watched, slowed on a monthly basis, from 0.82% in April to 0.17%

in May.

The figures came in ahead of the central bank's interest

rate-setting meeting on June 17-18, with policymakers vowing

"flexibility and caution" after hiking their benchmark interest

rate by 50 basis points to 14.75% last month.