Brasília - Although no specific prediction is ventured, the minutes of the most recent meeting of the Copom (Monetary Policy Committee), released today by the Brazilian Central Bank (BC), include the remark that in the present context, with annualized interest rates of 16% and the exchange rate at a level of R$ 3.00 to the American dollar, inflation forecasts exceed the official targets of 5.5% for this year and 4.5% for 2005, with tolerance limits of 2% in either direction.

Even if inflation in 2004 does not exceed the limit of 7.5%, this is still very close to the expectations of financial markets, which are predicting a Broad Consumer Price Index (IPCA) of 7.19%, due in large part to increases in industrial and administered prices, which contributed decisively to the 0.91% hike in the IPCA last month.

The Copom minutes mention that the estimated price readjustments for gasoline and cooking gas over the course of the year remain unchanged at 9.5% and 6.8%, respectively. Likewise, the estimates of 11.6% for residential electric rates and 12.8% for fixed point telephone services.

Regarding this month, the minutes state that the Committee expects consumer price indexes to decelerate. Overall, during the period from January to July, administered prices have already risen 4.69%, more, therefore, than the 4.42% increase in unregulated prices.

Agência Brasil
Reporter: Stenio Ribeiro
Translator: David Silberstein
08/26/2004