MercoPress. South Atlantic News Agency

Brazilian inflation 7,6%

Inflation in Brazil reached 7,6% last year compared to 9,3% in 2003 according to the Brazilian Geography and Statistics Institute, IBGE.

Economists had forecasted that December inflation would reach 0,79% and for the twelve months 7,5%.

Brazil's Amplified Consumer Prices Index which takes into account all families with monthly income below 2,700 US dollars, was therefore above the Central Bank's target of 5,5%. However it was below the additional tolerance margin of 2,5% (8%).

Since Brazil adopted the inflation target system in 1999, the forecasted index was only achieved in 2000 and in all other cases was overshot.

The 2005 inflationary target is 4,5% with a similar tolerance margin of 2,5%.

To control the inflationary process, the Brazilian Central Bank last year pursued a tight money policy with four monthly consecutive increases in the basic Selic interest rate which jumped from 16,25% to 18% annually.

IBGE blames mainly energy prices, with three consecutive domestic fuel increases, for the overshooting of 2004 inflation.

However IBGE also mentions domestic alcohol production for fuel. Extracted from sugar cane, adverse climatic conditions caused a significant contraction in the annual crop and an increase in prices.

Finally public utilities rates managed by the government: telephone bills jumped 14,76% and electricity 9,64%.