Reuters: US Dollar Report: EMERGING MARKETS-Brazil rates up on 'hawkish' central bank minutes

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EMERGING MARKETS-Brazil rates up on 'hawkish' central bank minutes Jan 24th 2013, 15:16 Tweet Share this Email Print Thu Jan 24, 2013 10:16am EST * Brazil expects higher inflation and aims for lower target * Markets speculate Brazil may raise rates later this year * Latin American currencies supported by U.S. jobless claims By Camila Moreira and Walter Brandimarte RIO DE JANEIRO, Jan 24 (Reuters) - Brazil's interest rate futures rose across the board on Thursday after the central bank emphasized its commitment to reining in inflation, prompting speculation it may tighten monetary policy later this year. In minutes of its latest monetary policy meeting published Thursday morning, the bank raised its inflation forecast for 2013 but said it works to bring inflation back to a government target in a "timely manner." It also killed bets of any additional cut in the base Selic rate by saying that monetary policy has run its course in stimulating economic activity. The minutes' tone, considered "hawkish" by many analysts, echoed comments made by central bank president Alexandre Tombini at the annual economic forum in Davos, Switzerland, on Wednesday. "By reading the minutes, we see a central bank more focused (on prices) than before, which leads us to believe it will raise interest rates if inflation persists," said Bruno Mota Gouvea, a fixed income broker with Renascenca brokerage in Sao Paulo. He believes rates could go up late this year or early 2014. A number of economists shared the same opinion. Luciano Rostagno, chief economist with WestLB bank in Brazil, said the central bank will likely be forced to raise the Selic "later this year, when the economy improves." LCA consultancy estimates the Selic to remain at its current all-time low of 7.25 percent until the beginning of 2014, but sees "growing chances that the rate could be increased before that." Interest-rate contracts maturing in January 2014 rose 4 basis points to 7.23 percent and, according to Gouvea, already included some bets on a 25 basis points increase in the Selic by the end of 2013. Meanwhile, the most traded Latin American currencies rose as U.S. data showing an unexpected drop in claims for unemployment benefits encouraged investors to take risk in emerging markets. The Brazilian real and the Mexican peso gained 0.2 percent and 0.3 percent, respectively. The Chilean peso was little changed, hovering around its strongest levels in almost four months. Latin American FX prices at 1455 GMT: Currencies daily % YTD % change change Latest Brazil real 2.0312 0.24 0.43 Mexico peso 12.6510 0.31 1.69 Chile peso 470.6000 0.08 1.72 Colombia peso 1781.1000 -0.03 -0.85 Peru sol 2.5530 0.00 -0.08 Argentina peso 4.9625 0.05 -1.01 Argentina peso 7.5000 0.27 -9.60 Tweet this Link this Share this Digg this Email Reprints Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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