Brazil’s higher-than-expected increase in prices last month won’t keep inflation from slowing toward its target, central bank President Alexandre Tombini said.
Consumer price increases will ease in the next three months and remain below the 0.64 percent gain posted in April, which was more than the central bank expected, Tombini told reporters in Rio de Janeiro today.
“We are in a process in which inflation is converging” toward target, Tombini said. “Over the next three months, monthly inflation will be slower than in April.”
Consumer prices in April jumped the most in a year, leading traders to increase bets policy makers will reverse course and raise the Selic rate early next year, after cutting it to a record over the next three months. The real posted the biggest decline among the most traded currencies in the past three months, reinforcing expectations policy makers will miss their inflation target of 4.5 percent as companies pass higher import costs on to consumers.
Analysts raised their 2013 inflation forecast to 5.56 percent in the most recent weekly central bank survey, from 5.11 percent at the end of February.
Tombini said the real is weakening as part of global trend that is strengthening the dollar against most currencies, adding that Brazil’s floating exchange rate helps “protect the economy.”
The yield on interest rate futures contracts maturing in January 2014 rose 19 basis points this week, as traders stepped up bets on interest rate increases next year.
Earlier today, Finance Minister Guido Mantega told reporters in Brasilia that the weaker currency wasn’t a concern for the government. Under Mantega’s watch, Brazil stepped up measures to stem a rally in the real that was hurting domestic manufacturers.
The real, which fell 12 percent in the past three months, rose 0.9 percent to 1.9530 percent U.S. dollar at 5:09 p.m. local time.
The stronger dollar “will benefit Brazilian industry,” Mantega said.
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