Brazil’s swap rates climbed from a four-week low as comments from the central bank’s chief fueled speculation that accelerating inflation will spur policy makers to raise borrowing costs.
Swap rates on the contract due in January 2015 increased three basis points, or 0.03 percentage point, to 8.47 percent at 11:43 a.m. in Sao Paulo after falling yesterday to 8.44 percent, the lowest level since March 6. The real depreciated 0.2 percent to 2.0233 per dollar.
Central bank President Alexandre Tombini said in Senate testimony yesterday that monetary policy shifted in January when policy makers voiced concern over inflation. Policy makers will wait for March inflation figures due to be released next week and other data before deciding on the next steps, he said.
“Tombini’s comments yesterday were conservative,” Paulo Petrassi, a portfolio manager at Leme Investimentos, said in a telephone interview. “The price indexes are gaining more attention now from the market as they show inflation is still pressured.”
Annual inflation in Latin America’s largest economy accelerated to a 14-month high of 6.31 percent in February from 6.15 percent in the previous month. March figures will be published April 10.
The central bank, in a quarterly report published last week, estimated there is a 25 percent chance inflation will exceed the 6.5 percent upper limit of its target range in 2013 for the first time in a decade even under a scenario in which the benchmark rate is increased to 8 percent this year from a record low 7.25 percent. Policy makers have an inflation target of 4.5 percent, plus or minus 2 percentage points.
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