In Brazil Inflation Falls, Unemployment Rises, Real Zooms Up 26%

Street vendors in Porto Alegre, Brazil The inflation index in Brazil fell to a seven-month low in February mitigating concerns about an increase in interest rates to keep prices under control, which has been one of the driving forces of the administration of Brazilian President, Luiz Inácio Lula da Silva.

Consumer, construction and wholesale prices, as measured by the IGP-M, rose 0.53% in February compared with a 1.09%, reported the Getúlio Vargas Foundation (FGV). The February rate was the lowest since a 0.28% climb in July.

The Brazilian central bank halted its longest cycle of monetary easing last October as policy makers sought to better gauge whether an inflation pickup was temporary. Annual inflation as measured by the benchmark IPCA index surged from an eight-year low of 2.96% in March 2007 to 4.56% last month.

According to the report from the FGV, rising wholesale and consumer food prices, which fueled inflation in previous months, decelerated in February. Wholesale agricultural prices rose 0.23% in February, down from 2.31% in January. Consumer food prices rose 0.21% in February compared with a 2.25% jump a month-earlier.

In a separate report by IBGE, the Brazilian statistics office, unemployment rose to 8% in January from a six-year low of 7.4% in December. The increase was expected as companies shed temporary Christmas staffing. Still, unemployment in January was lower than the 9.3% rate a year-earlier.

Meantime the real ended the week at 1.6762 per dollar, the strongest since May 1999. The currency has gained 26% in the past 12 months, the biggest increase among the 16 major currencies against the dollar.

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