BRAZIL'S MIXED INFLATION MESSAGES.

In a companion analysis this month (see page 4), Market: Latin America notes that one estimated measure of Brazil's inflation shows consumer prices increasing 14.7 percent when the tally is in for 2004. Toward the end of December 2004, AFX Financial, the financial news agency of Agence France-Presse (AFP), reported that Brazil's IPCA (Consumer Price Index Amplified) inflation would be 7.41 percent for 2004 according to the latest calculations of the Banco Central do Brasil (BCB), Brazil's central bank.

Around the same time, Bloomberg reported that the BCB raised its key overnight interest rate to 17.75 percent because of inflation fears. The minutes of the BCB's mid-December monetary policy meeting cited inflationary pressure from the country's fastest economic growth in a decade.

Problem question: Brazil has a number of different inflation indexes Morgan Stanley calls it an "alphabet soup" so it's hard to know what's really happening to consumer prices, harder still to know if the BCB knows.

Short answer: The best information we find is that inflation in Brazil is under control, and for 2005 will be slightly lower, in keeping with BCB's latest market survey.