Brazilian Swap Rates Decline as Inflation Slows; Real Advances

Brazil’s swap rates fell after a report showed annual inflation unexpectedly slowed last month, encouraging speculation that the central bank will limit further increases in borrowing costs.

Swap rates on contracts maturing in January 2017 declined four basis points, or 0.04 percentage point, to 11.86 percent at 10:36 a.m. in Sao Paulo after rising yesterday to a two-year high of 11.90 percent. The real appreciated less than 0.1 percent to 2.2870 per U.S. dollar.

Annual inflation slowed to 5.84 percent in October from 5.86 percent in the prior month. The median forecast of economists surveyed by Bloomberg was for an acceleration to 5.87 percent. The central bank raised the target lending rate to 9.50 percent from a record low 7.25 percent this year, the most among 49 nations tracked by Bloomberg.

“Inflation was a bit slower than expected,” Flavio Serrano, an economist at Banco Espirito Santo de Investimento SA in Sao Paulo, said in a telephone interview.

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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