Brazil Swap Rates Rise as Inflation Accelerates; Real Advances

Brazil’s shorter-term swap rates climbed after an index of wholesale, construction and consumer prices rose more than forecast, spurring speculation the central bank will raise borrowing costs to curb inflation.

Swap rates due in January 2014 increased four basis points, or 0.04 percentage point, to 7.85 percent at 10:10 a.m. in Sao Paulo. The real rose 0.4 percent to 1.9848 per dollar.

The Getulio Vargas Foundation reported today that its IGP- DI index advanced 0.31 percent last month, higher than the 0.20 percent increase forecast by economists surveyed by Bloomberg. Tomorrow’s report from the national statistics agency is forecast by economists to show that consumer prices rose 6.62 percent in March from a year earlier, exceeding the upper limit of the central bank’s target range.

“Higher IGP-DI inflation data today probably mean quickening inflation tomorrow and can feed the idea that the Selic will rise as early as April,” Newton Rosa, the chief economist at Sul America Investimentos in Sao Paulo, said in a telephone interview.

Further action may be necessary to rein in inflation after policy makers adjusted their communications strategy, central bank President Alexandre Tombini said in Porto Alegre yesterday.

Minutes of the central bank’s March 5-6 meeting indicated that an increase in the benchmark lending rate known as the Selic from a record low 7.25 percent wasn’t imminent as policy makers said “a cautious management of monetary policy” was needed. Board members are scheduled to meet April 16-17.

To contact the reporters on this story: Blake Schmidt in Sao Paulo at; Josue Leonel in Sao Paulo at

To contact the editor responsible for this story: David Papadopoulos at

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