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Brazilian Swap Rates Rise on Gasoline Outlook as Real Weakens

Brazil’s swap rates climbed after a government official said he expects a gasoline price increase this year, boosting bets that the central bank will extend raises in borrowing costs to curb inflation.

Swap rates due in January 2016 rose four basis points, or 0.04 percentage point, to 11.01 percent at 3:43 p.m. in Sao Paulo. The real slipped 0.1 percent to 2.1783 per dollar.

Energy Minister Edison Lobao told reporters in Brasilia he is “confident” that Finance Minister Guido Mantega will approve a gasoline price increase this year as chairman of the state-run oil company Petroleo Brasileiro SA. President Dilma Rousseff said inflation will close the year within the central bank’s target range of 2.5 percent to 6.5 percent.

“We have the prospect that the gas prices will be increased, which is causing more speculation of further borrowing cost increases,” Jankiel Santos, the chief economist at Banco Espirito Santo de Investimento SA, said in a telephone interview. “The president is also saying Brazil will meet its inflation target, which reinforces the notion that we’ll have more austerity.”

To contact the reporter on this story: Blake Schmidt in Sao Paulo at bschmidt16@bloomberg.net

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

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