Tombini Says Brazil to Act in Timely Way to Slow Inflation

Brazil’s central bank will do what’s necessary in a timely way to ensure inflation starts slowing in the second half of this year, central bank President Alexandre Tombini said. Swap rates rose.

“The bank increased rates in April, and will continue to work in that sense,” Tombini told reporters today following a speech in Rio de Janeiro. “We are in the middle of this process, and in two weeks we will define the new interest rate for the Brazilian economy.”

The central bank last month raised its benchmark rate for the first time since July 2011 amid signs that price increases are undermining Brazil’s economic recovery by curbing demand and investors’ confidence. Policy makers are scheduled to decide again on rates in a May 28-29 meeting.

Inflation in the world’s biggest emerging market after China is near the 6.5 percent upper limit of the central bank’s target range even after growth slowed for two straight years. President Dilma Rousseff’s administration is trying to rein in consumer prices without jeopardizing faster economic growth.

“The central bank is vigilant and will do what’s needed, in a timely way, to put inflation in a declining trend in the second half, and to ensure that that trend will continue next year,” Tombini said in today’s speech.

Swap Rates

Swap rates on the January 2014 contract rose 7 basis points to 8.05 percent at 4:53 p.m. local time as traders raised bets policy makers may increase the pace of interest rate increases.

Policy makers in April lifted the Selic rate by a quarter-percentage point to 7.5 percent in a 6-to-2 vote, after keeping it at a record low since October.

“Those who believe in a half a percentage point rate increase will seek support and will find it in the speech” Tombini made today, Newton Rosa, chief economist at SulAmerica Investimentos, said in phone interview from Sao Paulo.

Brazil’s economic growth accelerated less than expected in March, the central bank said in a report today.

The seasonally adjusted economic activity index, a proxy for gross domestic product, rose 0.72 percent in March after falling a revised 0.36 percent in February. Analysts expected a 0.85 percent increase, according to the median estimate of 24 economists surveyed by Bloomberg.

Retail sales in March fell for the second straight month, as consumers reigned in supermarket purchases, the national statistics agency said this week.

The central bank’s indicator shows the economy expanded at an annualized pace of 4.25 percent first quarter, which is in line with policy makers’ forecasts for 3.1 percent growth this year, Tombini said. GDP climbed 0.9 percent in 2012.

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