Brazil’s central bank may extend into next year a program of swaps and credit line auctions that has caused the real to appreciate at the fastest pace in the world, central bank President Alexandre Tombini said.
“The program has proved successful in curbing volatility and could be extended beyond year end if necessary,” he said in prepared remarks for an Oct. 12 speech before the International Monetary and Financial Committee.
The central bank said Aug. 22 it would carry out currency swap auctions of $500 million a day on Mondays, Tuesdays, Wednesdays and Thursdays, as well as credit line auctions of $1 billion a day on Fridays. The $60 billion program was scheduled to run through Dec. 31.
The real, which weakened to almost a five-year low before the intervention started, has gained 11.9 percent since Aug. 22, the best performance among global currencies tracked by Bloomberg. The real rose 0.2 percent today to 2.1761 per dollar.
The central bank board also is using monetary policy to ensure a weaker real doesn’t fan inflation, Tombini said in the transcript of the speech, which was posted in English on the central bank website today. Policy makers have raised the benchmark Selic rate in the past five meetings to 9.5 percent.
“Monetary policy responded firmly to inflationary pressures since the beginning of 2013, first through communication and then raising the policy rate since April,” according to the speech. “Monetary policy is contributing to making inflation retreat and limiting FX pass-through.”
Annual inflation slowed to 5.86 percent in September from 6.09 percent the prior month. Policy makers target 4.5 percent inflation, plus or minus two percentage points.
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