The full impact of Brazil’s yearlong interest-rate tightening cycle has yet to be reflected in the inflation rate, according to the central bank.
Policy makers led by bank President Alexandre Tombini voted unanimously this month to raise the benchmark Selic rate to 11 percent from 10.75 percent, extending the longest rate-tightening cycle in the world.
The central bank said inflation remains persistent and predicted the recent jump in food prices will be temporary, officials said in the minutes of their April 1-2 meeting.
“Given the impact of monetary policy on inflation is cumulative and happens with delays, the committee considers that a significant part of the response of prices to the current monetary tightening cycle will still materialize,” policy makers said in the minutes.
President Dilma Rousseff’s administration is struggling to contain above-target inflation that threatens to further curb purchasing power.
Higher food and beverage costs in March drove monthly consumer price increases above all economist estimates as annual inflation reached the highest rate in eight months. Brazil’s growth in 2014 is forecast by analysts to trail the Latin American average for the fourth straight year.
“The minutes suggest there will be no more increases,” Andre Perfeito, chief economist at Gradual Investimentos in Sao Paulo, said by phone.
“But at the next meeting in May we know inflation will be near the top of the target range. In that situation, it will be difficult for the central bank not to act.”
Swap Rates
Swap rates on the contract maturing in January 2015 fell four basis points, or 0.04 percentage point, to 11.06 percent at 9:43 a.m. local time.
The real weakened 0.65 percent to 2.2013 per U.S. dollar. The central bank has raised borrowing costs by 375 basis points in nine straight monetary policy meetings, including 100 basis points so far in 2014.
Elsewhere in the region, Chile has cut its benchmark rate by 50 basis points this year to stimulate lagging economic growth, while Colombia and Mexico have kept their borrowing costs unchanged.
Brazil’s inflation as measured by the IPCA index accelerated to 0.92 percent in March from 0.69 percent the month prior, pushing annual inflation to 6.15 percent.Policy makers target consumer price increases of 4.5 percent, plus or minus two percentage points.
Target Range
Gradual Investimentos yesterday boosted its 2014 forecast to 6.54 percent from 6.16 percent, cautioning that prices will breach the upper limit of the central bank’s target range in June.
Nomura Securities said yesterday inflation would surpass that 6.5 percent limit as early as July. Analysts polled on April 4 by the central bank estimate Tombini will raise interest rates once more this year, leaving the Selic at 11.25 percent as growth shows signs of easing.
Latin America’s largest economy will slow to 1.9 percent this year from 2.3 percent in 2013, falling short of the regional average of 2.4 percent for 2014, according to analysts polled by Bloomberg. Brazil’s industrial output expanded in February for the second straight month.
The country posted a trade deficit in two of the first three months of the year, while the unemployment rate surged to 5.1 percent in February, still a record low for the month, from 4.3 percent at the end of last year.
bloomberg.com
Policy makers led by bank President Alexandre Tombini voted unanimously this month to raise the benchmark Selic rate to 11 percent from 10.75 percent, extending the longest rate-tightening cycle in the world.
The central bank said inflation remains persistent and predicted the recent jump in food prices will be temporary, officials said in the minutes of their April 1-2 meeting.
“Given the impact of monetary policy on inflation is cumulative and happens with delays, the committee considers that a significant part of the response of prices to the current monetary tightening cycle will still materialize,” policy makers said in the minutes.
President Dilma Rousseff’s administration is struggling to contain above-target inflation that threatens to further curb purchasing power.
Higher food and beverage costs in March drove monthly consumer price increases above all economist estimates as annual inflation reached the highest rate in eight months. Brazil’s growth in 2014 is forecast by analysts to trail the Latin American average for the fourth straight year.
“The minutes suggest there will be no more increases,” Andre Perfeito, chief economist at Gradual Investimentos in Sao Paulo, said by phone.
“But at the next meeting in May we know inflation will be near the top of the target range. In that situation, it will be difficult for the central bank not to act.”
Swap Rates
Swap rates on the contract maturing in January 2015 fell four basis points, or 0.04 percentage point, to 11.06 percent at 9:43 a.m. local time.
The real weakened 0.65 percent to 2.2013 per U.S. dollar. The central bank has raised borrowing costs by 375 basis points in nine straight monetary policy meetings, including 100 basis points so far in 2014.
Elsewhere in the region, Chile has cut its benchmark rate by 50 basis points this year to stimulate lagging economic growth, while Colombia and Mexico have kept their borrowing costs unchanged.
Brazil’s inflation as measured by the IPCA index accelerated to 0.92 percent in March from 0.69 percent the month prior, pushing annual inflation to 6.15 percent.Policy makers target consumer price increases of 4.5 percent, plus or minus two percentage points.
Target Range
Gradual Investimentos yesterday boosted its 2014 forecast to 6.54 percent from 6.16 percent, cautioning that prices will breach the upper limit of the central bank’s target range in June.
Nomura Securities said yesterday inflation would surpass that 6.5 percent limit as early as July. Analysts polled on April 4 by the central bank estimate Tombini will raise interest rates once more this year, leaving the Selic at 11.25 percent as growth shows signs of easing.
Latin America’s largest economy will slow to 1.9 percent this year from 2.3 percent in 2013, falling short of the regional average of 2.4 percent for 2014, according to analysts polled by Bloomberg. Brazil’s industrial output expanded in February for the second straight month.
The country posted a trade deficit in two of the first three months of the year, while the unemployment rate surged to 5.1 percent in February, still a record low for the month, from 4.3 percent at the end of last year.
bloomberg.com
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