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Brazil Rate Futures Rise on Greek Austerity Vote; Real Gains

Yields on Brazilian interest-rate futures contracts rose for the first time in a week after Greece’s approval of austerity measures boosted global growth optimism and a central bank survey showed economists forecast inflation will remain above target through 2013.

Yields on the futures contract due in January 2013 climbed four basis points, or 0.04 percentage point, to 9.33 percent, the first increase since Feb. 3. The real advanced 0.4 percent to 1.7163 per U.S. dollar, from 1.7224 on Feb. 10.

Futures yields rose after Greek lawmakers’ approval of austerity measures paved the way for a financial rescue package, fueling bets that policy makers won’t need to slash borrowing costs to protect Brazil’s economy from a global slump. Economists expect consumer prices to rise 5.29 percent this year and 5 percent next year, above the 4.5 percent midpoint of the central bank’s target range, according to a Feb. 10 central bank survey of 100 economists published today.

“The improvement in the external environment favors a rise in interest rates,” Vladimir Caramaschi, chief economist of Credit Agricole’s Brazilian unit, said by phone from Sao Paulo. “For weeks now, the inflation forecasts for 2012 and 2013 have been stable. Expectations are rigid, above the target.”

Brazil targets annual inflation of 4.5 percent, plus or minus two percentage points.

Futures yields also rose today because of comments by Petroleo Brasileiro SA’s outgoing chief executive officer, Jose Sergio Gabrielli, who said Brazil will need to increase fuel prices eventually. The comments spurred speculation inflation may accelerate, according to Caramaschi.

Fuel Prices

The current gap between domestic and international prices is unsustainable and damped profit at Brazil’s state-controlled oil company in the fourth quarter, Gabrielli told O Estado de S.Paulo.

Gabrielli will be officially replaced tomorrow.

Brazil’s benchmark rate will be 10.5 percent at the end of next year, according to the median forecast in the central bank survey, compared with an estimate of 10.75 percent the previous week. Growth next year will be 4.1 percent, the economists said, down from an estimate of 4.2 percent the week before.

Policy makers will increase the Selic next year to keep inflation under control after reducing it to 9.5 percent this year, the survey shows.

-- Editors: Brendan Walsh, Glenn J. Kalinoski

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