Brazil Swap Rates Fall on Sign of Slowing Inflation; Real Drops

Brazil’s swap rates dropped as consumer prices in Sao Paulo rose less than economists forecast and Europe’s recession deepened, fueling speculation that the central bank will refrain from lifting borrowing costs.

Swap rates on the contract due in January 2015 decreased four basis points, or 0.04 percentage point, to 8.12 percent at 10:08 a.m. in Sao Paulo. The real depreciated 0.1 percent to 1.9670 per dollar.

Consumer prices in Sao Paulo, Brazil’s biggest city, climbed 1.01 percent in the four weeks ended last week, Foundation Economics Research Institute reported today. The median forecast of 18 economists surveyed by Bloomberg was for a 1.07 percent increase. Europe’s economy contracted the most in almost four years.

“Interest-rate futures should fall, especially in the shortest part of the curve, reacting to the FIPE inflation number and frustration with growth in European economies,” Octavio de Barros, the chief economist at Banco Bradesco SA, wrote in an e-mail message.

Gross domestic product in the euro area fell 0.6 percent in the fourth quarter from the previous three months, the most since the first quarter of 2009, the European Union’s statistics office reported.

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

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

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