2005 Brought Lowest Inflation in Seven Years to Brazil: 5.69%

The Broad Consumer Price Index (Àndice de Preços ao Consumidor Amplo) (IPCA) closed out 2005 with the lowest increase since 1998. In 1997, the real, the Brazilian currency had a sharp devaluation. The increase was 5.69%. in 2005, down from 7.6% in 2004.

Even with the low rise in the IPCA, some prices did increase significantly. Such as bus fares, the price of gasoline, and telephone and electricity bills. All of those prices are government controlled.

Urban bus fares jumped an average 10.4%. According to the government statistics bureau (IBGE), that was an increase that had a big impact on low-income family budgets. Gasoline prices rose 7.76% during the year.

Last year’s inflation rate exceeded the bull’s-eye of the federal government’s official target of 4.5%, as well as the revised target of 5.1% announced by the Central Bank (BC).

Still, the 5.69% rate was not off the target, which has an upward tolerance limit of 7%. The rate was also close to the 5.68% forecast by the financial market, according to information contained in the BC’s Focus bulletin, issued at the beginning of the month.

The government uses the IPCA to determine its inflation targets and assess the need to adopt indirect or indirect measures to induce price stability.

Price increases cause the purchasing power of workers’ salaries to decline more rapidly. Lower levels of inflation allow salaries to retain their purchasing power over a longer period of time.

Agência Brasil

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