Brasília, January 29, 2004 (Agência Brasil - ABr) - The Monetary Policy Committee (Copom) considers that the resurgence of higher market prices in December and January may be more than a simple temporary phenomenon, becoming an "eventual assimilation of inflation on higher levels." It is in these terms that the Copom, in the minutes of its last meeting, last week, justifies additional caution in the way that monetary policy is managed, as it interrupted a process of reductions in the prime interest rate that began in June, 2003.

According to the minutes, members of the Copom weighed the risk of inflation's veering away from the established targets and there having to be changes in monetary policy in the medium-term, "with palpable damages to the process of economic recovery." By eight votes to one, it was judged "more appropriate" temporarily to interrupt the process of making monetary policy more flexible, in order "to preserve the gains made" so far in the fight against inflation.

The objective, the document informs, is "to prevent the price readjustments that are occurring in the sectors most benefitted by the resumption of economic activity from contaminating the rest of the prices in the economy." (DAS)