Tombini Signals Brazil to Keep Currency Interventions Unchanged

Brazil’s central bank chief Alexandre Tombini signaled today policy makers will continue with their $60 billion currency intervention plan, even after the real rallied more than any other currency in the world.

“The program is adequate, it’s working well,” Tombini told reporters and analysts in a conference call today. There is “no news whatsoever from our side on this issue.”

The real has gained 10.6 percent since the central bank said on Aug. 22 it would offer $3 billion in swap and credit line auctions per week. After the Federal Reserve surprised analysts last week by deciding against tapering U.S. stimulus, Finance Minister Guido Mantega said the central bank could curtail its dollar auction program.

“Tombini signaled there will be no changes to the program,” said Andre Perfeito, chief economist at Gradual Investimentos. “If the real gains more, you may not have demand for the auctions but they won’t cancel them.”

Tombini reiterated the central bank has to remain specially vigilant to prevent a weaker real from fueling inflation through more expensive imports. The real has weakened 6.9 percent this year.

Swap rates on the contract maturing in January 2015, the most traded in Sao Paulo today, fell one basis point, or 0.01 percentage point, to 10.06 percent at 1:50 p.m. local time. The real strengthened 0.34 percent to 2.2030 per U.S. dollar.

Brazil’s annual inflation slowed to 5.93 percent in mid-September, the first time the rate was below 6 percent this year.

Central bankers have lifted the key rate 1.75 percentage points to 9 percent this year after inflation surpassed the upper limit of their target range for the first time since 2011.

“As far as inflation is concerned, we have made progress,” Tombini said. “In the last three, four months we have seen inflation come down.”

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