Brazil Must Raise Rate Until Outlook Reaches Target, Volpon Says

Brazil’s central bank should continue raising interest rates until 2016 inflation expectations reach the center of the target range, said its international affairs and risk management director, Tony Volpon.

“I personally will vote for increasing interest rates until our forecast is positively pointing to the target at the end of 2016,” he said in Sao Paulo Monday. “Expectations will continue to fall, especially in 2016, but it’s still very early. We need to stabilize and consolidate this framework so we eventually can think of monetary accommodation.”

Economists surveyed by the central bank on Friday reduced their 2016 inflation estimate for the third straight week, to 5.40 percent from 5.44 percent in the previous survey. The central bank targets annual inflation of 4.5 percent, plus or minus 2 percentage points.

Policy makers lifted the benchmark rate last month for the sixth consecutive time, to 13.75 percent. Analysts in the central bank survey estimate the key rate will end the year at 14.5 percent, dropping to 12 percent in 2016.

The swap rate on the contract maturing in January 2017 fell 12 basis points, or 0.12 percentage point, to 13.33 percent Monday.

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