Brazil Says Inflation to Exceed 4.5% Target for Fourth Year

Brazil’s central bank expects inflation to exceed the mid-point of its target range for a fourth straight year in 2013 as price pressures remain resilient, said the central bank’s director for economic policy.

“It is unrealistic to imagine that inflation will converge to 4.5 percent in 2013,” director Carlos Hamilton told reporters today in Belo Horizonte. “Inflation is showing resistance in the first half and will tend to fall in the second half.”

After monthly consumer prices jumped in January by the most in almost eight years, the central bank said inflation is at a high level that requires attention. While policy makers have kept the benchmark interest rate at a record low since October, central bank President Alexandre Tombini said this week that monetary policy in the world’s second-largest emerging market can shift if the inflation outlook requires.

Swap rates on the contract maturing in January 2014, the most traded in Sao Paulo, fell four basis points, or 0.04 percentage point, to 7.65 at 1:21 p.m. local time. The real fell 0.6 percent to 1.9747 per dollar.

Increases in the minimum wage, government-controlled prices and food and beverage costs have kept inflation from slowing, Hamilton said.

Consumer prices as measured by the benchmark IPCA index rose 0.86 percent in January, a government report showed Feb. 7. The median estimate from 41 economists surveyed by Bloomberg was for a 0.83 percent rise. Annual inflation accelerated to 6.15 percent from 5.84 percent the previous month.

Analysts surveying Brazil’s economy have increased 2013 inflation forecasts in six of the last seven weeks, according to the latest central bank survey of about 100 economists. They expect consumer prices to rise 5.7 percent this year, down from 5.84 percent in 2012.

Year-end inflation has remained above the 4.5 percent goal since slowing to 4.31 percent in 2009.

Brazil’s economy grew 1 percent last year, the central bank said in December. Growth will rebound to 3 percent to 4 percent this year, according to Finance Minister Guido Mantega.

To contact the reporters on this story: Raymond Colitt in Brasilia Newsroom at rcolitt@bloomberg.net; Matthew Malinowski in Brasilia at mmalinowski@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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