Brazil’s central bank is likely to raise the benchmark Selic interest rate to 9 percent or more to combat inflation that may exceed the country’s target ceiling in 2013, according to Mapfre DTVM SA.
“We’re quite worried about inflation,” vice-president Eliseo Joao Viciana, who oversees 10 billion reais ($4.9 billion), said in a telephone interview from Sao Paulo. “There is a risk of the IPCA exceeding the upper-end of the target and IGP-M returning to two digits.”
Mapfre DTVM, a Brazilian unit of the Spanish insurer, plans to invest in bonds linked to inflation and companies that have “good cash flow and capacity to pass through price increases,” which will probably remain profitable as inflation accelerates, he said.
Brazil’s central bank has lowered the Selic to a record low of 7.5 percent in nine consecutive rate cuts since August 2011, from 12.5 percent. The country targets inflation of 4.5 percent, plus or minus two percentage points.
Economists surveyed by the central bank expect the IPCA inflation to reach 5.51 percent and Selic to rise to 8.5 percent next year, according to average estimate in the Focus survey released yesterday.
Brazil’s prices as measured by the IGP-M index rose 1.43 percent in August, the biggest increase since November 2010. The gauge gives producer prices a 60 percent weighting; consumer prices 30 percent; and construction costs 10 percent.
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