MercoPress. South Atlantic News Agency

Brazil's Central Bank promises full action against inflation

Central Bank H. Meirelles

The Brazilian Consumer price index unexpectedly slowed in June from May, though on an annual basis inflation remains at its fastest pace since November 2005, according to the latest report from the country's IBGE (Brazilian Geography and Statistics Institute) released on Thursday.

The benchmark IPCA consumer price index rose 0.74% in June, less than May's 0.79% and less that what markets expected but still with excessive inflation inertia which has all bets on that the Central Bank will raise the benchmark Selic rate at this month's monetary policy meeting. Faster inflation since earlier this year has prompted the Brazilian central bank to raise the Selic rate by one percentage point since April to 12.25%, and another half percentage is expected at the end of July. Central bank chief Henrique Meirelles and other officials have repeatedly expressed the government's commitment to keeping inflation pressures from spreading and this Thursday Meirelles said the bank will not remain complacent but act decisively when necessary to bring inflation toward the center of the government's target in 2009. The Central Bank has a 4.5% inflation target fro 2008, 2009 and 2010 with a plus/minus two points. "The central bank has been and continues to act to bring inflation to the center of the target of 4.5 percent in a timely fashion, that is, in 2009," he said. Food and beverage prices jumped 2.11% in June after a 1.95% increase the previous month and showed a widespread gain in most items surveyed, the IBGE said. Prices of staple foods, such as rice and black beans, surged last month, rising 9.9% and 7.54%. In June meats surged 6.91% contributing 0.14% to the index. Clothing prices rose 0.42% in June, slowing from a 0.98% gain the previous month, while personal spending costs climbed 0.54% after a 1.11% surge in May, helping to mitigate the overall index. In the first half of the year inflation rose 3.64%, compared to 2.08% in the same period of last year. In the 12 months to June, IPCA rose 6.06% compared with a previously reported 5.58% increase in the year to May and 5.89% in the year to mid-June, which is the highest annual rate since November 2005, when the IPCA gained 6.22%.