Brazil Flirting with Deflation

The Cost of Living Index (Àndice do Custo de Vida) (ICV), in the city of São Paulo, in the southeast of Brazil, rose 4.54% in 2005, the lowest in seven years and the second lowest since the index began in 1959, reports the union-linked Statistics and Socio-Economic Department (Departamento Intersindical de EstatÀ­stica e Estudos Socioeconômicos) (Dieese).

Compared to 2004, when it was 7.7%, the ICV was down 3.16 percentage points.

Inflation in 2005 was so low that in two months, June and July, there was deflation.

Cornélia Nogueira Porto, of Dieese, says the ICV report is very good news and could lead to a relaxing of the government’s rigid monetary policies.

Porto says that the Dieese inflation forecast for 2006 is 3% to 3.5%, that is, a further reduction.

As for 2005, the Dieese report says that prices rose above average mainly in transportation, education and health, while they remained very low in all other sectors.

Agência Brasil

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