MercoPress. South Atlantic News Agency

Brazil's inflation surges in April

Brazil's consumer price index rose a 0.87% in April the highest monthly rate since last July (0,91%) according to the latest release from the Brazilian Institute of Geography and Statistics, IBGE. Last March the index increased 0.61%.

Inflation in the first four months of 2005 has reached 2,68%, more than half the 5,1% target set by government for the whole year, and 8,07% in the last twelve months.

In 2004 Brazil's inflation reached 7,6% which was 2,1 points above the official target although within the pre established "margin of tolerance".

Government inflation target for 2006 remains unchanged at 4,5% with a maximum tolerance of 6,5%.

April's inflationary surge was pushed by a 0.81% jump in food prices, well above the 0.26% of March, reports IBGE. Public transport also was a determining factor. A poll among leading companies in the private sector forecasts an annual inflation of 6,3%.

Prices continue rising faster than government estimates, increasing investor fears that the Central Bank will continue its policy of hiking interest rates to rein in inflation.

The basic Central Bank interest rate or Selic, currently stands at 19,5%, but market estimates indicate it could drop to 18% by December 2005 and to 15,5% by the end of 2006.

GDP growth estimates remain at 3,6% in 2005 and 3,5% in 2006 with a trade surplus of 34 billion US dollars and 28 billion US dollars. Private direct investment is forecasted will reach 15 billion US dollars in 2005 and a similar figure the following year.

Current account surplus has been estimated in 9 billion US dollars in 2005 and 3,6 billion in 2006.