Brazil central bank President Alexandre Tombini said policy makers are committed to their 4.5 percent inflation target, prompting traders to increase bets the key rate will be lifted half a percentage point next month.
“We at the central bank are committed to bringing inflation down,” Tombini told reporters today in Washington. “The central bank’s objective is to ensure the target, which is a government target set by the National Monetary Council, is reached.”
Brazil’s central bank this week raised the benchmark Selic by a half-point for a fourth consecutive meeting, pushing borrowing costs to 9.5 percent. Tombini is carrying out the world’s biggest tightening cycle in a bid to tame consumer prices that have remained above the mid-point of the target for the past three years.
Swap rates on the contract due in January 2015, the most traded in Sao Paulo today, extended earlier gains and rose seven basis points, or 0.07 percentage point, to 10.35 percent at 3:59 p.m. local time. The real strengthened 0.1 percent to 2.1783 per U.S. dollar.
Tombini said inflation this year will ease below last year’s 5.84 percent while continuing to slow in 2014.
“What’s in play is 2014 inflation,” Andre Perfeito, chief economist at Gradual Investimento, said by phone. “Tombini is trying to control long-term inflation expectations, and he is also acting by raising interest rates.”
Analysts surveyed weekly by the central bank forecast inflation will accelerate to 6 percent in 2014 from 5.8 percent in 2013, according to the latest survey published Oct. 7. Inflation in the year through September was 5.86 percent, the national statistics agency said on Oct. 9, the slowest since December.
Brazil’s central bank targets annual inflation at 4.5 percent, plus or minus two percentage points.