Brazil Inflation Surpasses Government Target and Reaches 5.04%

Brazil supermarket The Consumer Prices Index in Brazil experienced its biggest increase in four months in April, 0.55% (up from March's 0.48%) because of higher food costs, according to the Brazilian Institute of Geography and Statistics (IBGE).

The index was in line with analysts expectations but is considerably higher than April 2007, 0.25%. The CPI for the first four months now stands at 2.08%, compared to 1.51% a year ago, added IBGE. In the last twelve months inflation was 5.04%, which is above the target established by the Central Bank.

The current inflation targets for 2008 and 2009, with a two percentage points tolerance has been established at 4.5%.

IBGE said food prices were responsible for almost half of April's inflation having jumped 1.29% in April compared to 0.89% in March.

"Inflation profile this year is similar to last year's but since food prices are putting on more pressure, inflation in 2008 begun at a higher level. Higher food prices will be almost constant the whole year," said IBGE economist Eulina Nunes dos Santos adding that this year's "inflation will be mostly international."

Brazil's central bank policy makers increased the benchmark interest rate for the first time in three years last month in an attempt to contain inflation.

Nunes dos Santos further warned that "there's no reason to believe that May's CPI will be lower. There are no indications of such a tendency internationally and we don't believe food prices will ease sufficiently to have a real impact." Inflation in May last year was 0.28%.

Food staples had the major impact in April's CPI, followed by clothing, hygiene products and medicines, which increased 1.53%, 1.41% and 1.18%. On the other extreme non food prices slowed down to 0.34% in April from March's 0.34%.

Regarding energy prices the strong Brazilian currency and biofuels helped to bring down prices by 0.65%, 0.49% and 0.14% respectively for ethanol fuel, electricity and gasoline.



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