This level represents a pick-up from last year, when energy prices were falling, but it is in the vicinity of core CPI inflation over the last couple of years. This outlook involves several risks. The continuing downside risk posed by possible economic and financial instability around the world was highlighted earlier this year by the events in Brazil.
Although financial contagion elsewhere has been limited to date, more significant knock-on effects in financial markets and in the economies of Brazil’s important trading partners, including the United States, are still possible. Moreover, the economies of several of our key industrial trading partners have shown evidence of weakness, which if it deepens could further depress demands for our exports.