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Brazilian inflation at its fastest pace in over five years

Saturday, June 28th 2008 - 21:00 UTC
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Brazil's monthly inflation accelerated to its fastest pace in more than five years on rising wholesale prices for manufacturers. The IGP-M price index, Brazil's broadest measure of consumer, construction and wholesale prices, rose 1.98% in June, up from a 1.61% surge in May, according to the Getulio Vargas Foundation.

Monthly wholesale prices, led by a 3.11% surge in raw materials, jumped 2.27% compared to a 2.01% rise the previous month. Compared to June 2007, the IGP-M index rose 13.44%, the highest since October 2003 and more than triples the 3.89% reading of June 2007. The IGP-M index has been growing faster than the government's benchmark IPCA consumer price index because of rising wholesale prices, which comprise 60% of the index. In the first six months of 2008, the IGP-M index has risen 6.82%, the fastest January-through-June rate since 1999, when the index surged 8.28%. Brazilian consumers have been shielded from the worst of rising energy costs because of the government's decision to offset price increases for gasoline with lower taxes at the pump. Consumer prices as measured by the IGP-M index jumped 0.89% in June from a month ago, pushing the 12-month rate up to 5.82%, within the government's target range of 4.5% plus or minus 2 percentage points. Powered by higher consumer spending, the economy expanded 5.8% in the first quarter. Brazil's GDP has risen 5.76% in the last four quarters, its fastest pace since 1995. Brazil's central bank has raised rates twice in three months from a record-low 11.25% to 12.25% in a bid to cool inflation. Market analysts anticipate the benchmark rate or Selic will reach 14.25% by the end of 2008.

Categories: Economy, Brazil.

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