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Friday, May 09, 2008

Brazil Inflation April 2008

Brazilian consumer prices had their biggest increase in four months in April because of higher food costs. Consumer prices, as measured by the government's benchmark IPCA index, climbed 0.55 percent last month from 0.48 percent in March, the government's statistics agency said in a report distributed today in Rio de Janeiro. Brazil's inflation rate in the 12 months through April was 5.04 percent.

Brazil's central bank policy makers increased the benchmark interest rate for the first time in three years last month in an attempt to contain inflation. Inflation is emerging as a threat to economic stability after years of ``quiescence,'' and officials must be wary of policies that stoke consumer prices, the International Monetary Fund's deputy chiefJohn Lipsky said yesterday.

``This inflation speed-up must be taken seriously as it creates potentially significant challenges to economic stability,'' John Lipsky, the IMF's first deputy managing director, said in a speech in New York today. A return to 1970s-style high inflation and rising price expectations ``cannot be discarded out of hand,'' he said.

While the surge in energy and other commodity prices is the main cause of the danger, low central bank interest rates and a falling dollar are also contributing, Lipsky said.

Brazil's food prices climbed 1.29 percent in April from the previous month, up from the 0.89 percent increase in March. The central bank targets inflation of 4.5 percent plus or minus 2 percentage points.

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