Brazil inflation in 2011 highest since 2004

Consumer prices in Brazil rose 6.5 percent in 2011, reaching the upper limit of the government target but the highest hike since 2004, the state statistics agency said on Friday. The 2011 increase compared with the 7.6 percent surge recorded in 2004 and 5.9 percent in 2010. The government had set an annual inflation target of 4.5 percent, with a ceiling of 6.5 percent. Prices were up 0.5 percent in December, following a half percent hike in November, the Brazilian Geography and Statistics Institute (IBGE) said. The announcement coincided with a downward revision of GDP growth in Latin America's leading economy as a result of the eurozone debt crisis. The government said the economy would expand around 3.0 percent this year, sharply lower than the 7.5 percent recorded in 2010 amid expectations of a gradual drop in inflation due to the global economic slowdown. The Central Bank said inflation this year should dip to 4.5 percent in line with the official target. It welcomed the fact that the inflation target "was met in 2011 for the eighth consecutive year." "Inflation is heading downward and closed 2011 at 6.5 percent, after reaching 7.3 percent in the third quarter," it said, adding that "other indicators bolster the perception of a significant cooling-off of inflationary pressure." "We hope that this downward movement toward the center of the (government) target will continue, so that (inflation) ends 2012 below 5.0 percent," said acting finance minister Nelson Barbosa. "Food prices have already begun decelerating, with a fall in relation to 2010, and this deceleration should continue. And services prices, with the stable jobless rate, should remain stable," he told reporters. Prices which rose the most last year were those of transport, up 3.6 percent due to higher prices for various household budget items such as air fares and ethanol. The increase in food and beverage prices however dropped from 10.4 percent in 2010 to 7.2 percent last year.