Brazil Fails to Meet Inflation Target 5th Year in 6 (Update3)
Jan. 14 (Bloomberg) -- Brazil missed its inflation target in 2004 for the fifth time in six years, eroding investor confidence in the central bank's estimates.
``The central bank starts every year with a very aggressive inflation target and as the year goes on, they acknowledge they won't make it, but promise they'll make it next year,'' said Tony Volpon, an economist at Titulo Corretora de Valores in Sao Paulo who has covered the market for 15 years.
Inflation was 7.6 percent in the 12 months through December, above the 5.5 percent target set in January 2003, the government's statistics agency in Rio de Janeiro said today.
The central bank's inability to meet its targets has contributed to higher interest rates in South America's biggest economy because it leads investors to anticipate consumer prices will rise faster than predicted, said Christian Stracke, an analyst with CreditSights Inc. Policy makers raised the benchmark lending rate four times since September, which would have been unnecessary had they earned investors' trust in previous years by meeting inflation targets, Stracke said.
``Missing their targets year after year means those targets are no longer credible,'' Stracke, 33, said in a telephone interview from Augusta, Georgia. ``That lack of credibility has pushed rates higher than they should be otherwise.''
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