Bloomberg News

Brazil Swap Rates Climb as Inflation Accelerates; Real Advances

April 11, 2013

Brazil’s swap rates climbed to a one-week high after an inflation index rose at the fastest pace this year, adding to speculation that policy makers will raise borrowing cost as soon as next week.

Swap rates due in January 2015 increased seven basis points, or 0.07 percentage point, to 8.55 percent at 10:11 a.m. in Sao Paulo, the highest level on a closing basis since April 3. The real appreciated 0.1 percent to 1.9707 per dollar.

The Getulio Vargas Foundation reported today that its IGP-M inflation index of wholesale, construction and consumer prices rose 0.42 percent from March 21 to March 31, the fastest pace since a 0.50 percent increase in late November.

“There is a strong flow of news in favor of a rate hike,” Daniel Cunha, an economist at XP Investimentos in Sao Paulo, said in a telephone interview. “The signs are that prices are resisting.”

The government benchmark consumer price index rose at an annual rate of 6.59 percent in March, exceeding the 6.50 percent upper limit of the central bank’s target range for the first time since November 2011.

The government pays attention to inflation, which is harmful to all of Brazil’s economy, Finance Minister Guido Mantega told reporters in Brasilia yesterday.

To contact the reporters on this story: Blake Schmidt in Sao Paulo at bschmidt16@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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