Bloomberg News

Brazil Swap Rates Drop as Inflation Measure Lower Than Expected

January 21, 2013

Brazil swap rates fell the most in a week as a measure of inflation was lower than expected, helping policy makers hold off on raising benchmark borrowing costs from a record low.

Swap rates on contracts due January 2015 fell two basis points, the most since Jan. 14, to 7.86 percent at 9:59 a.m. in Sao Paulo. The real was little changed at 2.0419 per dollar.

Getulio Vargas Foundation’s IGP-M index of wholesale, construction and consumer prices rose 0.34 percent in the second reading for January, less than the median forecast of 0.38 percent in a survey of 21 economists by Bloomberg.

“There was an unexpected deflation of agricultural products, which is even more surprising in January, when food costs generally surprise on the upside,” Flavio Combat, an economist at Concordia Corretora, said in a phone interview from Rio de Janeiro. “We also had a small drop in growth forecasts that weighed a bit on the market.”

Analysts cut their economic growth estimates for a third straight week, with the median forecast dropping to 3.19 percent from 3.2 percent the week before, according to central bank weekly survey of about 100 financial institutions.

The central bank held the benchmark lending rate at a record-low 7.25 percent last week for the second straight meeting.

To contact the reporter on this story: Blake Schmidt in Sao Paulo at

To contact the editor responsible for this story: David Papadopoulos at

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