Inflation is on the rise in Brazil, adding to the country’s economic challenges. CCTV’s Paulo Cabral reported this story from Sao Paulo.

Brazil currency drops for third straight week as inflation rises

Inflation is on the rise in Brazil, adding to the country's economic challenges. CCTV's Paulo Cabral reported this story from Sao Paulo.

Worldwide oil prices may be down, but fuel prices went up in Brazil in January as the government increased taxes to balance its battered accounts.

Electricity prices are also on the rise with record drought-depleting reservoirs for the country’s hydroelectric plants, and forcing authorities to run more expensive thermal plants.

The severe drought is also impacting food production. The price of some fruits and vegetables sensitive to weather has already doubled, but price hikes can be seen across all the supermarket shelves.

Year-on-year inflation in January in Brazil rose to 7.1 percent, up from 6.4 percent in December 2014.

In 2014, Brazil’s inflation was 6.41 percent, right below the upper limit of the government’s inflation target range — between 2.5-6.5 percent — but the latest market survey forecasts it will top this ceiling for 2015 overall, hitting 6.56 percent.

Brazilian authorities have been struggling to control inflation for the last couple of years and they did manage to keep it right below the official inflation target last year. But prices are still rising, and the government is running out of options.

The government has promised it will do whatever it takes to fight inflation – which in the past has meant slowing down the economy through higher interest rates and spending cuts. Economists said it will not be easy or painless to strike the right balance.