Brazilian real touches highest since May as Mantega sets ceiling

Faster Inflation

Swap rates climbed yesterday after the government reported that consumer prices increased in January at the fastest pace in almost eight years, adding to bets that the central bank will increase borrowing costs.

The government reported that its main consumer price index, known as IPCA, rose 0.86% in January from a month earlier, the most since April 2005. The median forecast of 41 economists surveyed by Bloomberg was for a 0.83% advance. Annual inflation accelerated to 6.15%, faster than the 4.5% midpoint of the central bank’s target range for a 29th month.

Seven Cities

Swap rates rose today, erasing earlier decreases, after the Getulio Vargas Foundation reported that its IPC-S index of prices in Brazil’s seven biggest cities rose 0.88% in the month ended Feb. 7, higher than the 0.85% median forecast of 14 analysts surveyed by Bloomberg.

Central bank President Alexandre Tombini said in an interview with GloboNews that annual inflation won’t exceed the 6.5% upper limit of the central bank’s target range in the first half of 2013.

The central bank held the target lending rate at a record low 7.25% for a second straight time after the slowest two years of economic expansion in a decade. Policy makers have cut benchmark borrowing costs by 5.25 percentage points since August 2011, the most aggressive cuts among Group of 20 nations.

Bloomberg News

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