Inflation index ends 2005 with biggest decline since 1998

12/01/2006 - 13h21

Thais Leitão
Reporter - Agência Brasil

Rio - The cumulative rate of inflation in 2005, as gauged by the Broad Consumer Price Index (IPCA), amounted to 5.69%, down from the 7.60% registered in 2004. This was the IPCA's lowest level since 1998, when the index rose only 1.65%. These data, released yesterday (12) by the Brazilian Institute of Geography and Statistics (IBGE), indicate a deceleration in price increases for the majority of goods and services purchased by the Brazilian population.

Last year's inflation rate exceeded the bull's-eye of the federal government's official target of 4.5%, as well as the revised target of 5.1% announced by the Central Bank (BC). Still, the 5.69% rate was not off the target, which has an upward tolerance limit of 7%. The rate was also close to the 5.68% forecast by the financial market, according to information contained in the BC's Focus bulletin, issued at the beginning of the month.

The government uses the IPCA to determine its inflation targets and assess the need to adopt indirect or indirect measures to induce price stability. Price increases cause the purchasing power of workers' salaries to decline more rapidly. Lower levels of inflation allow salaries to retain their purchasing power over a longer period of time.

Translation: David Silberstein