MercoPress. South Atlantic News Agency

Brazil businessmen expect higher inflation

Brazil's financial markets expect the annual inflation target to advance from 6,36% to 6,50% following the latest data about retail and wholesale price indexes, according to a poll among the country's main one hundred companies and published by Focus from the Central Bank.

Estimates for the May broad retail price index also were increased from 0,46% to 0,50%, confirming that the government's annual inflation target of 5,5% will not be achieved.

The Wholesale Price Index also suffered an upward push from 9,32% to 9,83% for the twelve months of 2004. Even the Sao Paulo Economic Research Polling Institute, FIPE, now admits that the government's target of an annual inflation of 5,5% will expand to over 5,53%.

"Administered or monitored" prices such as public utility rates (fuel, electricity, phones, etc.) are forecasted to reach a 7,60% expansion by the end of 2004, from the original May estimate of 7,20%.

Further on Focus indicates that financial markets expect the Brazilian currency, Real, to reach an exchange rate of 3,10 to the US dollars, up from the average 2,90 during the first four months of 2004. Similarly the basic interest rate, Selic, will remain at 14,50% with a slight drop to 13% in 2005.

Trade surplus will be above 26 billion US dollars and direct foreign investment 12 billion US dollars with the economy expanding at 3,5%. The net foreign debt ratio to the Brazil's GDP will remain at 57%.