Brazil’s Rousseff Said to Support Central Bank’s Monetary PolicyRaymond Colitt
Brazil’s President Dilma Rousseff fully backs the central bank’s monetary policy and will ensure its autonomy to do what is needed to tame inflation, a government official knowledgeable of economic policy said.
Rousseff had agreed with the need for the central bank, which accelerated the pace of interest rate increases this week, to adopt a more aggressive tone against inflation, said the official, who asked not to be named because he is not authorized to discuss the issue publicly.
The bank’s board on May 29 raised its benchmark Selic rate by 50 basis points to 8 percent in a bid to tame inflation that has been forestalling an economic recovery. The move surprised 38 of 57 economist surveyed by Bloomberg who expected a second straight 25 basis-point increase. The decision was anticipated by 19 of 57 economists surveyed by Bloomberg.
Annual inflation accelerated for nine straight months through March to 6.59 percent, above the top of the central bank’s target range of 2.5 percent to 6.5 percent. In April, it eased to 6.49 percent.
Rates on swaps maturing in January 2014 rose 37 basis points, or 0.37 percentage point, to 8.43 percent at 3:53 p.m. local time.
Rousseff said on March 27 she opposed anti-inflation measures that could slow growth, which led traders to speculate she wouldn’t agree with interest rate increases to rein in consumer prices. On the same day she said her comments were misinterpreted.
In April, after keeping borrowing costs at a record low since October, the central bank raised the benchmark interest rate for the first time since July 2011.
Central bank president Alexandre Tombini told TV Globo yesterday that the rate decision would reinforce confidence in the fundamentals of Brazil’s economy.