Yields on Brazilian interest-rate futures contracts rose as traders bet the central bank will boost borrowing costs by more than anticipated to cool inflation running at the fastest pace in more than two years.
The yield on the contract due in January 2012 climbed 3 basis points, or 0.03 percentage point, to 12.19 percent at 12:58 p.m. New York time. The yield on the contract due in January 2021 rose 3 basis points to 12.57 percent.
The central bank said last month in its quarterly inflation report the costs of meeting the consumer price target of 4.5 percent this year were “too high,” causing yields on the contract due in January to tumble 12 basis points. Traders who scaled back bets for rate increases in the near-term so avoid betting against the central bank are now increasing wagers because of “a consistent deterioration in inflation expectations, strong economic data and even still actual inflation,” said Siobhan Morden, an emerging markets debt strategist with RBS Securities.
“There’s now this groundswell of political and public opinion that’s pushing back against the central bank because ultimately there is a political cost of higher inflation,” Morden said by phone from Stamford, Connecticut. “Expectations are still showing that inflation is not contained and the strategy of policy mix pursued by the central bank is not yet effective.”
Inflation Forecast
Economists covering the Brazilian economy raised their forecast for 2012 inflation to 5 percent, from a week-earlier forecast of 4.91 percent, and their projection for 2011 inflation to 6.02 percent, from a forecast of 6 percent in the previous period, according to an April 1 central bank survey of about 100 analysts published yesterday.
The central bank will take the necessary steps to ensure that inflation slows to its target over the course of 2012, a government official familiar with monetary policy strategy, who asked not to be named because he isn’t authorized to discuss the issues publicly, said yesterday. Policy makers in Latin America’s biggest economy will also attempt to bring 2011 inflation as close as possible to the 4.5 percent target, said the official.
The combination of higher borrowing costs, curbs on consumer lending and government spending cuts will be enough to bring inflation back to its target in 2012, Carlos Hamilton, the central bank’s economic policy director, told reporters in Brasilia on March 30. The bank raised capital and reserve requirements in December as part of what policy makers call “macro-prudential measures” to curb the expansion of credit and quell inflation.
The real weakened 0.1 percent to 1.6088 per dollar, from 1.6073 yesterday, when it held near its strongest level since 2008.
The central bank said it bought dollars in the spot market today at 1.6078 reais each. The tactics are part of an effort by policy makers to weaken the currency, which has gained 44 percent since the end of 2008, the most among emerging-market currencies tracked by Bloomberg during that period.
Source: www.bloomberg.com
The yield on the contract due in January 2012 climbed 3 basis points, or 0.03 percentage point, to 12.19 percent at 12:58 p.m. New York time. The yield on the contract due in January 2021 rose 3 basis points to 12.57 percent.
The central bank said last month in its quarterly inflation report the costs of meeting the consumer price target of 4.5 percent this year were “too high,” causing yields on the contract due in January to tumble 12 basis points. Traders who scaled back bets for rate increases in the near-term so avoid betting against the central bank are now increasing wagers because of “a consistent deterioration in inflation expectations, strong economic data and even still actual inflation,” said Siobhan Morden, an emerging markets debt strategist with RBS Securities.
“There’s now this groundswell of political and public opinion that’s pushing back against the central bank because ultimately there is a political cost of higher inflation,” Morden said by phone from Stamford, Connecticut. “Expectations are still showing that inflation is not contained and the strategy of policy mix pursued by the central bank is not yet effective.”
Inflation Forecast
Economists covering the Brazilian economy raised their forecast for 2012 inflation to 5 percent, from a week-earlier forecast of 4.91 percent, and their projection for 2011 inflation to 6.02 percent, from a forecast of 6 percent in the previous period, according to an April 1 central bank survey of about 100 analysts published yesterday.
The central bank will take the necessary steps to ensure that inflation slows to its target over the course of 2012, a government official familiar with monetary policy strategy, who asked not to be named because he isn’t authorized to discuss the issues publicly, said yesterday. Policy makers in Latin America’s biggest economy will also attempt to bring 2011 inflation as close as possible to the 4.5 percent target, said the official.
The combination of higher borrowing costs, curbs on consumer lending and government spending cuts will be enough to bring inflation back to its target in 2012, Carlos Hamilton, the central bank’s economic policy director, told reporters in Brasilia on March 30. The bank raised capital and reserve requirements in December as part of what policy makers call “macro-prudential measures” to curb the expansion of credit and quell inflation.
The real weakened 0.1 percent to 1.6088 per dollar, from 1.6073 yesterday, when it held near its strongest level since 2008.
The central bank said it bought dollars in the spot market today at 1.6078 reais each. The tactics are part of an effort by policy makers to weaken the currency, which has gained 44 percent since the end of 2008, the most among emerging-market currencies tracked by Bloomberg during that period.
Source: www.bloomberg.com
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