Brazil Inflation


Brazil: Inflation accelerates in December as food prices increase

January 7, 2011

In December, the benchmark IPCA (indice Nacional de Precos ao Consumidor Amplo) price index added 0.63% compared to November's 0.83% reading, which slightly overshot market expectations that saw prices rising 0.60%. As a result, annual headline inflation increased from 5.6% in November to 5.9% in December, rising for a fourth consecutive month. December's monthly price increase was broad-based, as all the nine categories that compose the consumer price index registered higher prices. Prices for food and beverages, which rose 1.32% month-on-month, were the main driver behind the monthly increase. The average of core inflation indices, which smoothes out more volatile price fluctuations, added 0.66% in November, which pushed up annual core inflation to 5.4%. With the December increase, inflation further rose above the Central Bank's 4.5% target for 2010. Despite the recent price pressures, the Monetary Policy Committee (COPOM, Conselho de Politica Monetaria) decided unanimously to leave the benchmark SELIC interest rate unchanged at 10.75% at its latest meeting on 8 December. In its December Inflation Report the Central Bank expects inflation to end 2011 at 5.0% and 2012 at 4.8%.


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