Brazil Swap Rates Rise After Awazu Comment; Real Advances

Brazil shorter-term swap rates rose, erasing earlier declines after a central bank director said policy makers had no disagreement on whether to raise borrowing costs as they debated the timing this week.

Luiz Awazu Pereira, the central bank director for international affairs, said today at an event in Washington that inflation is high and persistent and that industry is recovering. Awazu voted against an increase.

Swap rates due January 2014 rose two basis points to 7.86 percent at 4:52 p.m. in Sao Paulo, after earlier dropping as much as six basis points. The real gained 0.5 percent to 2.0086 per dollar.

“Awazu’s comment that the debate wasn’t about if, but when to raise rates,” said Vladimir Caramaschi, chief strategist at Credit Agricole (ACA), in a phone interview from Sao Paulo. “The divergence is over the timing.”

The central bank’s board this week voted 6 to 2 to raise the target lending rate to 7.50 percent from a record low 7.25 percent. A survey by Bloomberg showed that 18 of 58 analysts forecast an increase of 50 basis points. Awazu was one of the 2 votes against raising rates.

Policy makers said “the high level” and “resilience” of inflation required a response, according to the board’s statement posted on the bank’s website.

To contact the reporters on this story: Blake Schmidt in Sao Paulo at bschmidt16@bloomberg.net; Marisa Castellani in Sao Paulo at mcastellani7@bloomberg.net

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

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