MercoPress. South Atlantic News Agency

Brazilian inflation decelerates but?.

Inflation in Brazil during February slowed down from 0,76% in January to 0,61%, according to the latest report from the Brazilian Geography and Statistics Institute.

The February consumer price index was below market expectations, 0,71%.

In the first two months of 2004, the consumer price index reached 1,37% totalling 6,69% in the last twelve months.

In spite of the deceleration of consumer prices, other economic data, --wholesale prices, energy and agriculture commodities--, indicate that inflation still has "vitality".

The consumer price index and expectations are some of the key elements taken into account by the Brazilian Central Bank when establishing interest rates, particularly the Selic rate that rules the credit market.

Analysts believe that given the latest data the influential Monetary Policy Committee of the Central Bank will feel inclined to leave interest rates unchanged when it meets next week.

However this could be another headache for the President Lula da Silva administration that after a first year in power with a contracting economy (-0,2%) and record unemployment has promised to stimulate domestic demand and create jobs to get the economy moving again.