Brazil Rate Futures Rise on Tombini Pledge to Increase Rates

Yields on Brazilian interest-rate futures contracts rose after central bank President Alexandre Tombini said he would increase interest rates for as long as needed to tame inflation.

Yields on the futures contract due in January 2012, the most actively traded today in Sao Paulo, rose four basis points, or 0.04 percentage point, to 12.36 percent at 9:22 a.m. in New York. The contract due in January 2013 rose three basis points to 12.69 percent.

Tombini yesterday pledged in an interview with Globo News TV that policy makers will raise interest rates for as long as needed to bring inflation back to their target next year.

“It’s not a 100-meter sprint, it’s a long process” he said. “Obviously, the monetary policy instrument that will get inflation back to its 4.5 percent target in 2012 is the conventional instrument that is being used, and will continue to be used for as long as necessary.”

President Dilma Rousseff’s administration is relying on a mix of higher borrowing costs, measures to curb credit growth and spending cuts to bring the fastest inflation in 29 months back to policy makers’ target in 2012. Tombini said interest rates remain the favored tool for fighting inflation.

“It seems that the central bank maybe won’t use macroprudential measures as much and will rely more on interest- rate increases,” said Newton Rosa, chief-economist at Sul America Investimentos, in a telephone interview from Sao Paulo.

The real advanced 0.1 percent to 1.5857 per dollar, from 1.5876 yesterday.

To contact the reporters on this story: {Josue Leonel} in Sao Paulo at jleonel@bloomberg.net; {Gabrielle Coppola} in Sao Paulo at gcoppola@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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