SAO PAULO/SANTIAGO, May 6 (Reuters) - Inflation slowed in
Brazil and Chile in April as price-fighting efforts by
policy-makers gained traction, prompting some economists and
investors to scale back expectations for interest rate hikes.
The slower pace of inflation in April eases pressure on
central banks in both countries to raise interest rates sharply
to contain prices, which would risk derailing brisk growth.
Inflation has been a growing headache for Latin America and
other emerging markets, driven by a spike in commodity prices
and strong domestic growth.
Central bankers in Brazil and Chile last month expressed
concern about the risk that high inflation could trigger
demands for big pay deals that could revive the region's
high-inflation mindset.
Commodity prices have fallen sharply in recent days,
however, relieving a key source of inflationary pressure.
"The worst is over and is being left behind in April,"
Finance Minister Guido Mantega declared to reporters. "Starting
in May ... inflation will be under control."
Still, economists cautioned that officials in Brazil and
Chile cannot let down their guard on inflation which has
prompted a series of interest rates hikes this year.
"Tightening has to be ongoing," said Kathryn Rooney Vera,
an emerging markets strategist with Bulltick Capital Markets.
"Definitely the main concern is inflation in these countries."
Brazil's benchmark IPCA inflation index rose 0.77 percent
in April, less than the 0.84 percent expected in a Reuters poll
and the 0.79 percent rise in March.
While 12-month inflation, at 6.51 percent, breached the top
of the government's target range, markets focused on the
unexpected monthly slowdown, sending yields on interest rate
futures <0#DIJ:> down.
Brazil's government has used an array of tools to try to
contain consumer prices, which have gained on relatively easy
credit, high public spending and demand for commodities.
The central bank has raised interest rates three times this
year, hiking the Selic rate to 12 percent from 10.75 percent.
Last month the central bank slowed its tightening pace to
25 basis points from 50 basis points but it said it saw a
"prolonged" tightening cycle to bring inflation to the center
of target range, set this year at 4.5 percent plus or minus 2
percentage points.
In Chile, inflation slowed to 0.3 percent in April from a
jump of 0.8 percent gain in March. Economists had expected an
increase of 0.4 percent.
A majority of analysts in a Reuters poll now see Chile's
central bank raising its main interest rate at its May 12
meeting to 4.75 percent from 4.5 percent. Last week most
analysts polled by Reuters had seen a hike to 5.0 percent.
"There are various factors helping and I hope that with
this the pace of interest rate increases will slow," Finance
Minister Felipe Larrain told reporters.
Source: www.reuters.com
Brazil and Chile in April as price-fighting efforts by
policy-makers gained traction, prompting some economists and
investors to scale back expectations for interest rate hikes.
The slower pace of inflation in April eases pressure on
central banks in both countries to raise interest rates sharply
to contain prices, which would risk derailing brisk growth.
Inflation has been a growing headache for Latin America and
other emerging markets, driven by a spike in commodity prices
and strong domestic growth.
Central bankers in Brazil and Chile last month expressed
concern about the risk that high inflation could trigger
demands for big pay deals that could revive the region's
high-inflation mindset.
Commodity prices have fallen sharply in recent days,
however, relieving a key source of inflationary pressure.
"The worst is over and is being left behind in April,"
Finance Minister Guido Mantega declared to reporters. "Starting
in May ... inflation will be under control."
Still, economists cautioned that officials in Brazil and
Chile cannot let down their guard on inflation which has
prompted a series of interest rates hikes this year.
"Tightening has to be ongoing," said Kathryn Rooney Vera,
an emerging markets strategist with Bulltick Capital Markets.
"Definitely the main concern is inflation in these countries."
Brazil's benchmark IPCA inflation index rose 0.77 percent
in April, less than the 0.84 percent expected in a Reuters poll
and the 0.79 percent rise in March.
While 12-month inflation, at 6.51 percent, breached the top
of the government's target range, markets focused on the
unexpected monthly slowdown, sending yields on interest rate
futures <0#DIJ:> down.
Brazil's government has used an array of tools to try to
contain consumer prices, which have gained on relatively easy
credit, high public spending and demand for commodities.
The central bank has raised interest rates three times this
year, hiking the Selic rate to 12 percent from 10.75 percent.
Last month the central bank slowed its tightening pace to
25 basis points from 50 basis points but it said it saw a
"prolonged" tightening cycle to bring inflation to the center
of target range, set this year at 4.5 percent plus or minus 2
percentage points.
In Chile, inflation slowed to 0.3 percent in April from a
jump of 0.8 percent gain in March. Economists had expected an
increase of 0.4 percent.
A majority of analysts in a Reuters poll now see Chile's
central bank raising its main interest rate at its May 12
meeting to 4.75 percent from 4.5 percent. Last week most
analysts polled by Reuters had seen a hike to 5.0 percent.
"There are various factors helping and I hope that with
this the pace of interest rate increases will slow," Finance
Minister Felipe Larrain told reporters.
Source: www.reuters.com
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