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Brazil’s Inflation: Down in Retail, Up in Wholesale

Inflation is showing signs of retraction in the retail segment, according to a Brazil Central Bank (BC) survey of financial institutions and market analysts last Friday, November 5.

Their forecast for this year’s overall Broad Consumer Price Index (IPCA), which serves as a parameter for the government’s targets, was lowered from an annualized 7.20% to 7.18%.


The numbers, however, do not reflect a tendency for inflation to decline in the market in general, as expectations for the inflation index computed by the Economic Research Institute Foundation (Fipe) of the University of São Paulo point in the opposite direction.


The IPC-Fipe, which last week’s survey gauged at 6.29%, is now estimated to end the year at 6.37%. It should be noted, however, that this index refers exclusively to the performance of prices in São Paulo, the capital.


The market remains unchanged in its expectation that the IPCA in 2005 will amount to 5.90% – above the core of the target originally set by the BC at 4.5% and later raised to 5.1%.


The estimate of the rate of inflation in October, to be announced on Thursday, November 11, by the Brazilian Institute of Geography and Statistics (IBGE), stayed at 0.45%, and the increase expected for this month stands at 0.60%.


There was a slight decline, from 6.24% to 6.21%, in the rate of inflation projected for the next twelve months, even though the forecast for the General Market Price Index (IGP-M) rose from 12.24%, last week, to 12.29%.


The estimate for administered prices (fuel, electricity, telephone services, and others) remained unchanged at 8.70% for this year but was revised from 7.15% to 7.20% for next year.


Agência Brasil
Translator: David Silberstein

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