Brazil Inflation Drops

Brazil’s annual inflation fell in 2005 to 5.69%, continuing a three-year downward trend. The IPCA consumer price index rose only 7.6% in 2004 after climbing 9.3% in 2003. The slowing inflation figure is another indicator that the central bank may go for a larger interest rate cut next week. However, Brazil’s benchmark lending rate, currently at 18%, continues to be among the world’s highest and the economy contracted by 1.2% in the third quarter of last year compared with the second.