Brazil’s President Dilma Rousseff told Congress at the start of its legislative year today her government’s commitment to slowing consumer price increases is “non-negotiable.”
“I reaffirm our commitment to measures aimed at converging inflation (BZPIIPCY) to the center of the target range,” Rousseff, who is eligible to run for re-election in October, wrote in her message to lawmakers.
Inflation in 2013 exceeded the mid-point of the government and central bank target range of 2.5 percent to 6.5 percent for the fourth straight year. Monetary policy makers have responded by boosting the benchmark interest rate for seven straight meetings while Rousseff’s economic team has pledged to control spending so it doesn’t fan prices.
Inflation accelerated to 5.91 percent in 2013 from 5.84 percent the year before as a weaker real increased the price of some imports. One-year breakeven inflation, a measure of consumer price estimates based on the gap in yields between inflation-linked government bonds and fixed-rate debt, climbed 0.09 percentage point to 6.58 percent today.
Brazil’s real has lost 3.2 percent against the dollar this year, following a 13 percent decline in 2013. The currency closed down 1.1 percent today at 2.4403 per U.S. dollar.
Inflation ended 2013 within the target range for the 10th straight year, indicating “consistency” of monetary policy, Rousseff said.
“The exchange rate remained at an adequate level,” she wrote.
Standard & Poor’s in June placed Brazil’s rating on negative outlook, and Moody’s Investors Service in October lowered its outlook to stable from positive, citing a deteriorating debt profile.
Brazil’s budget gap in 2013 reached 157.6 billion reais ($64.6 billion) after widening in December to 13.6 billion reais from 0.2 billion reais a month earlier. That’s the biggest year-end deficit since the series started in 2002.
“We in 2014 will manage public accounts” with a “profound commitment to fiscal responsibility,” Rousseff wrote.
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