Paulo Montoia
Reporter - Agência Brasil

São Paulo - Falling prices of ethanol and food are responsible for continued deflation in the city of São Paulo, according to the latest survey by the Economic Research Institute Foundation (Fundação Instituto de Pesquisas Econômicas) (Fipe). For the third week of June, Fipe found negative inflation of 0.44%. In the second week of June Fipe found negative inflation of 0.50%.

According to the coordinator of the survey, Paulo Pichetti, prices of foods of all types were down: fresh, semi-industrialized and industrialized (as a group, Food was down 1.77% in the survey). As for the drop in the price of ethanol, it is directly connected to an increase in supply now that the sugarcane harvest is underway.

However, Pichetti points out that the tendency is for positive inflation to return, as shown by the difference between the second and third weeks of June (the difference was 0.06 percentage points). But he adds that the increase will be small and everything points to 2006 inflation slightly less than in 2005, when in was 4.5% for the year. Pichetti says there is every reason to believe the government will reach its target of 4% inflation for this year.

Translation: Allen Bennett