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Thursday, June 26, 2008

Brazil Inflation Mid-June 2008

Brazil's mid-month consumer prices jumped by the most in four years in June, and the central bank forecast the fastest year-end inflation since 2004, cementing expectations that policy makers will push interest rates higher.

Inflation as measured by the IPCA-15 index rose 0.9 percent through mid-June, up from 0.56 percent a month earlier, the government said. It was the biggest jump since July 2004 when prices rose 0.93 percent. The annual inflation rate for 12 months through mid-June accelerated for the third straight month to 5.89 percent, up from 5.25 percent in mid-May.

Brazilian policy makers in the central bank's quarterly report on inflation released today said they expect rising food prices and domestic demand to push up the annual inflation rate to 6 percent by year-end. Looking ahead, annual inflation will slow to 4.7 percent by the end of 2009, remain unchanged in the first quarter of 2010 before rising to 4.8 percent in the second quarter of the year, the bank said.

The bank's previous quarterly inflation report, released in March, also put year-end inflation above the mid-point of policy makers' target of 4.5 percent, plus or minus 2 percentage points. Policy makers in March had forecast year-end inflation of 4.6 percent for 2008 and 4.4 percent for 2009.

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