Brazil Swap Rates Rise on Inflation Outlook as Real Strengthens

Brazil swap rates rose as economists lifted their forecast for inflation in 2015, fueling bets that the central bank will extend borrowing-cost increases.

Swap rates due January 2016 climbed three basis points, or 0.03 percentage point, to 11.75 percent at 9:23 a.m. in Sao Paulo. The real gained 0.2 percent to 2.3386 per dollar.

Inflation will accelerate to 6.01 percent at the end of this year and end 2015 at 5.6 percent, up from a forecast of 5.5 percent a week ago, according to the median estimate of about 100 economists in a central bank survey published today. They raised their projection for benchmark borrowing costs to end this year at 10.75 percent, up from 10.5 percent a week before.

“The weekly central bank survey is guiding the swap rates market today,” said Octavio de Barros, the chief economist for Banco Bradesco SA (BBDC4), in an e-mailed note to clients.

The central bank lifted the target lending rate on Jan. 15 to 10.50 percent as last year’s surge in consumer prices made curbing inflation a greater concern over reviving growth in Latin America’s biggest economy. The decision came after a government report showed that consumer prices rose 5.91 percent in 2013 even as central bank President Alexandre Tombini said in October that inflation would be less than the prior year’s 5.84 percent.

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

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

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