SAO PAULO (Dow Jones)–Consumer inflation in Sao Paulo, Brazil’s largest city, slowed in 2011 as the increase in food prices decelerated in the period, the Fipe research foundation said Wednesday.

Fipe, which is affiliated with the University of Sao Paulo, said its consumer price index rose 5.81% last year, compared with a rise of 6.40% in 2010.

Despite the slowdown, the reading came above market forecasts, which ranged from an increase of 5.5% to an increase of 5.73%.

Prices of food items, the largest component of the index, rose 5.02% in 2011, compared with an increase of 12.2% in 2010.

In the meantime, transportation costs increased 7.03% last year, compared with a rise of 7.06% previously.

For December, consumer prices rose 0.61% from a month earlier, compared with an increase of 0.60% in November. The figure also was above market forecasts of a rise between 0.41% and 0.55%.

-By Rogerio Jelmayer, Dow Jones Newswires; 5511-3544-7071;