SAO PAULO (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.