Brazil Rate Futures Yields Fall to Four-Month Low on Inflation Forecast

Yields on Brazil’s interest-rate futures contracts fell to a four-month low as the central bank said inflation will drop below its forecast, boosting speculation policy makers will slow the pace of rate increases.

The yield on the contract due in January dropped four basis points, or 0.04 percentage point, to 10.69 percent at 9:27 a.m. New York time, the lowest on an intraday basis since April 23.

Worsening conditions in the international markets in the last few weeks will help slow inflation in Brazil, Valor Economico reported, citing unidentified people from the central bank. Inflation will range from 0.5 percent to 0.6 percent in the third quarter, Valor said. That compares with the 0.89 percent forecast by the central bank in its last quarterly report, the Sao Paulo-based newspaper said.

“Global commodity prices are one of several uncertainties that could have a significant effect on Brazil’s inflation volatility,” said Zeina Latif, senior economist at RBS Securities Inc. in Sao Paulo. “Lower food prices in Brazil are reducing inflation in other areas, and that is why we are seeing lower forecasts.”

The central bank raised borrowing costs by a less-than- forecast half percentage point in July to 10.75 percent.

The real weakened 0.3 percent to 1.7579 per dollar, from 1.7531 yesterday.

To contact the reporters on this story: Boris Korby in New York at Bkorby1@bloomberg.net

• Tweet
• More
  • Business Exchange
  • Buzz up!
  • Digg
• Print
• Email