Brazil’s swap rates climbed after the central bank said it must remain “especially vigilant” on inflation, adding to speculation that policy makers will maintain the pace of increases in borrowing costs.
Swap rates on the contracts maturing in January 2015 rose 11 basis points, or 0.11 percentage point, to 10.65 percent at 10:10 a.m. in Sao Paulo and were up 13 basis points this week. The real depreciated 0.9 percent to 2.3789 per U.S. dollar, extending its drop since Dec. 13 to 2 percent.
The central bank said in a quarterly inflation report published today that consumer prices will rise 5.6 percent next year, a pace that is still more than a percentage point higher than Brazil’s 4.5 percent target. Policy makers raised the target lending rate to 10 percent on Nov. 27, increasing it by a half-percentage point for a fifth consecutive time.
“The central bank kept the word ‘vigilant,’ which signals it may keep raising the target rate 0.50 percentage point,” Mauricio Junqueira, who helps oversee 750 million reais at Tese Gestao de Investimentos, said by phone from Rio de Janeiro.
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