Crisis Hits Brazil: Credit Thins Out, Interests and Inflation Up

São Paulo, Brazil, Metro subway Brazil's annual inflation rate rose to a three-year high in October as the currency's significant plunge against the US dollar pushed up costs, according to the latest release from the government's statistics and geography institute, the IBGE.

Consumer prices as measured by the benchmark IPCA index rose 6.41% in the 12 months through October from 6.25% in September. The annual rate was the highest since July 2005.

As the global financial crisis has investors abandoning emerging markets, Brazil's currency real has lost a quarter of its value against the US dollar in two months, pushing up prices of goods and materials purchased overseas.

The October CPI was up 0.45% with food prices leading with 0.69%, boosted by a 7.74% jump for the price of black beans, a basic staple, and 3.61% for meat.

Since January inflation has remained above the 4.5% annual midpoint target of Brazil's central bank. The uncertain economic outlook convinced the Central Bank last October 29 to leave the benchmark rate unchanged at 13.75%, according to minutes of their meeting published this week.

The real lost 12% in October following a 14% loss in September, which was the Brazilian currency's worst month since a 20% plunge in September 2002.

Earlier this week it was announced that Brazil vehicle registrations during October fell for the first time in 2 years as credit dried up and interest rates rose. Vehicle registrations slipped to 239.200 units in October from 244.500 units a year earlier, the country's automakers association, known as Anfavea said in São Paulo. However production was little changed at 296.300, while exports declined 16% to 66.000.

Finance Minister Guido Mantega said a government-controlled bank will provide the equivalent of US$ 1.9 billion in loans to carmakers' financial arms to help sustain sales this month and in December.

Mercopress

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