Bloomberg News

Brazil’s Swap Rates Rise Before Policy Meeting; Real Depreciates

March 04, 2013

Brazil’s swap rates rose for the first time in four days as economists raised their inflation forecasts and traders speculated that central bank policy makers will signal a rate increase at their meeting this week.

Swap rates on the contract due in January 2014 climbed one basis point, or 0.01 percentage point, to 7.63 percent at 10:16 a.m. in Sao Paulo. The real depreciated 0.2 percent to 1.9844 per U.S. dollar.

The central bank begins a two-day policy meeting tomorrow to decide whether to hold the target lending rate known as the Selic at a record low 7.25 percent for a third time to support the economy even as inflation has exceeded the 4.5 percent midpoint of its preferred range for more than two years.

“If the central bank changes the language in its statement this week, the market is going to incorporate an increase in the Selic rate,” Luis Otavio de Souza Leal, the chief economist at Banco ABC Brasil SA in Sao Paulo, said in a telephone interview.

Annual inflation a year from now will be 5.62 percent, according to the central bank’s weekly survey of economists published today, up from a 5.49 percent estimate a week ago.

To contact the reporters on this story: Gabrielle Coppola in Sao Paulo at gcoppola@bloomberg.net; Josue Leonel in Sao Paulo at jleonel@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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