Inflation Ends 2012 Above Target: Daily

By Ben Tavener, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Brazil’s key inflation rate, the Consumer Price Index (IPCA), ended 2012 at 5.84 percent – at the high end of the government’s target rate of 4.5 percent plus or minus two percent. Inflation was up 0.79 percent in December, figures from the Brazilian Institute for Geography and Statistics (IBGE) have revealed, a figure greater than expected and the highest since March 2011.

The rate was down on the previous year, when the index stood at 6.5 percent, but has now been above the target of 4.5 percent, established by the Central Bank in 2005, for the three consecutive years – although all within a two-percent margin of variation.

The last time the rate was below the target was in 2009, when it closed the year at 4.31 percent. Central Bank President Alexandre Tombini said on Thursday that while inflation may rise in the short term, it should fall again later on in 2013.

Economists have warned that the rate and the fact that the Brazilian economy barely grew in 2012, despite record-low interest rates and other government-led stimulus measures, means that price pressure could get even more intense in 2013, particularly if activity picks up, Reuters reports.

Inflation was one of the contributing factors to the poor performance of the economy in 2012. The historic drought being experienced in parts of Brazil is also likely to pile the pressure on President Rousseff’s government, who are keen to get the country’s economy back to solid growth, while maintaining low interest rates.

Analysts have said this will have a real impact on the president’s pledge to reduce energy costs by twenty percent made during her Independence Day speech in September 2012.

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