Brazil Explains High Interest Rates: Christmas and Oil

The growing disparity between wholesale and retail industrial prices – which constitutes a source of inflationary pressure, especially with the upswing in year-end demand -, together with the jump in oil prices, heightened the risks for domestic price trends.

This explanation appears in the minutes of last week’s meeting of the Monetary Policy Committee (Copom), which raised the government’s annualized benchmark interest rate (Selic) from 16.25% to 16.75%, despite the favorable recent inflation performance.


It should be recalled that the Broad Consumer Price Index (IPCA) registered an inflation of only 0.33% in September, a significant drop in relation to the 0.69% registered in August.


The document, released today by the Central Bank, states that, despite the recent deceleration in wholesale industrial prices, the cumulative increase in the July-September quarter amounted to 4.8%, while retail prices, as measured by the IPCA, rose only 1.3%.


For this reason, the minutes emphasize the “transitory nature of a large part of the positive influences observed during the period” and note that inflation forecasts are running higher than the mid-range target of 5.5% for this year and next year’s objective of 5.1%.


According to the Copom minutes, the scenario considered in simulations of the future retains the projection that gasoline prices will suffer an overall readjustment of 9.5% this year, despite doubts regarding the world oil market.


Bottled cooking gas, in turn, is expected to be readjusted 4.9%, a smaller overall increase than last month’s estimate of 6.2%.


The Copom maintained its projection from last month that the basket of prices regulated by contract and monitored by the government will rise 8.5% this year and 6.9% in 2005.


Residential electric bills will end the year costing 11.5% more (the same percentage as in the previous estimate).


The only change, in an upward direction, was in the area of fixed telephone service, for which the increase is now expected to total 14% (instead of 13.9%).


According to the Copom minutes, the cooling-off of inflation in free market prices, especially for unprocessed food items, was insufficient to halt the deterioration of expectations regarding inflation in 2005,” despite the appreciation of the exchange rate, the favorable performance of current inflation, the recent drop in international prices of important commodities, and the signs of a tightening in monetary policy in recent months.”


Agência Brasil
Translator: David Silberstein

Tags:

  • Show Comments (0)

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Beyond Soccer and Carnaval, 10 Reasons to Take Brazil Seriously

Though journalists, international affairs professionals, travel lovers, and international businessmen are already well aware ...

Brazilian airline Gol

Brazil’s Gol Airline Tickets Can Be Paid in Up to 36 Months

Brazilian airline Gol has just announced that it has expanded payment methods for tickets ...

Child Labor Went Down in Brazil, But 5 Million Underage Workers Are Still Way Too Many

One hundred and eleven years after Brazil abolished slavery, the number of workers deprived ...

US Sends Trade Representative Schwab to Brazil to Revive Doha Talks

U.S. Trade Representative Susan C. Schwab will be in Brazil from July 27 to ...

Brazil’s Referendum on Gun Sales May Never Happen

The publication of a Unesco study of deaths in Brazil by firearms has ratcheted ...

Brazil’s Development Banks to Lend US$ 22 bi, 50% More than in 2004

The Brazilian Development Bank (BNDES) made loans of approximately US$ 2.27 (in current figures) ...

Brazilians Treated to Arab Poetry and Music

The Institute of Arab Culture presents this Tuesday, June 7, at 8 o’clock in ...

Wallerstein on Brazil’s Surge and the Decline of the US Empire

In the course of his visit to the Southern Cone of South America, the ...

Chí¡vez Calls Venezuela-Brazil Gas Pipeline Insurance Against Energy Crisis

The left-leaning leaders of three South American heavyweights – Brazil, Argentina and Venezuela – ...

Cover Story

The epic of Palmares — a state founded in the 17th century by runaway ...