Lower Food Price Helps Bring Down Inflation in Brazil

Brazilian supermarket Brazil's Consumer Prices Index (CPI) slowed down to 0.53% in July from 0.74% the previous month, according to a release from the Brazilian Geography and Statistics Institute, IBGE. The percentage was in the range anticipated by economists which are consulted on a weekly basis by the Brazilian Central Bank. In July 2007, the CPI index was 0.24%.

In June food and beverage prices had the largest incidence on the monthly index but the item decelerated considerably from 2.11% to 1.05% in July.

In the first seven months of this year the CPI reached 4.19% which is almost double the 2.32% of the same period in 2007.

Annual inflation to July reached 6.37%, up from the last twelve months to June 6.06%, which still is in the higher bracket of this year's Central Bank target of 4.5%, plus/minus two percentage points.

However most private financial institutions from Brazil forecast annual inflation will be above 6.5%.

The Brazilian keeping to its orthodox approach against inflation tightened credit policy this year by 175 points taking the reference Selic rate to 13%.

For Valmor Rovaris, the superintendent of Apras (Paraná's Supermarkets Association) the Brazilian food sector is stable. The deceleration of prices for food and drinks going from an increase of 1.05% in July compared to 2.11 in June shows that, he says.

"Since 1994, food prices kept below several other items, such as communication, transport, energy and inflation. What occurred in the recent months can be credited to a recovery in the sector," Rovaris argued. According to him,  there is no interest by the companies to boost prices. Most, he added, even holds any increase, fearing the competition, since the market is competitive.

"An option supermarket came up with was to sell cheaper products using products with their own label, something that has been well received by the public. Consumers are abandoning their loyalty to brands," he noted.

Mercopress/Bzz

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