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Sunday, November 26, 2006

Brazil's Inflation

Brazil's inflation rate rose to an 8-month high of of 0.37% in November, while the y-o-y rate dropped to 2.99%, the lowest since 1999. This certainly takes the pressure off the central bank on interest rate policy:

Brazil's monthly inflation rate rose to an 8-month high through mid-November as the cost of food items such as meat and chicken soared.

Consumer prices, as measured by the government's IPCA-15 price index, rose 0.37 percent in the 30 days through Nov. 13, compared with a 0.29 percent increase in the previous month ended Oct. 11, Brazil's National Statistics Agency said today on its Web site.

The inflation rate is still low enough to allow the central bank to keep cutting its benchmark lending rate, said Joel Bogdanski, a senior economist at Banco Itau Holding Financeira SA. Annual inflation slowed to 2.99 percent in the 12 months through mid-November, the lowest since June 1999, from 3.26 percent at the end of October.

The central bank has trimmed the benchmark lending rate 6 percentage points in the past 14 months to 13.75 percent, the lowest in at least two decades. Bogdanski expects policy makers to cut the rate a half-percentage point at a meeting next week and reduce it to as low as 11 percent by the end of next year.

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