Brazilian Swap Rates Decline After Inflation Report; Real Rises

Brazil’s swap rates dropped to a two-week low after an inflation report added to speculation that the central bank will signal tomorrow that it will slow the pace of increases in borrowing costs.

Swap rates due in January 2015 fell two basis points, or 0.02 percentage point, to 10.06 percent at 9:55 a.m. in Sao Paulo, the lowest level on a closing basis since Sept. 25. The real climbed 0.2 percent to 2.2006 per U.S. dollar.

Policy makers begin a two-day meeting today after raising the target lending rate to 9 percent from a record low 7.25 percent in April, the fastest pace among major economies tracked by Bloomberg. The real has rallied 11 percent since Aug. 22, when the central bank embarked on $60 billion intervention program to bolster the currency and curb import prices.

The gauge of inflation “came in lower than expected, showing that the impact of the real on inflation may be losing strength,” Luciano Rostagno, the chief strategist at Banco Mizuho do Brasil, said in a telephone interview.

Wholesale, construction and consumer prices rose 1.36 percent in September from a month earlier after previously climbing 0.46 percent, the Getulio Vargas Foundation reported today. The median forecast of 30 economists surveyed by Bloomberg was for a 1.49 percent increase.

Policy makers will raise the target rate by 50 basis points for a fourth straight meeting tomorrow, according to the median forecast of analysts surveyed by Bloomberg.

To contact the reporters on this story: Blake Schmidt in Sao Paulo at bschmidt16@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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