Reuters: US Dollar Report: UPDATE 2-Brazil signals more rate hikes despite firmer currency

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UPDATE 2-Brazil signals more rate hikes despite firmer currency Oct 17th 2013, 13:15 Share this Email Print Reprints Thu Oct 17, 2013 8:35am EDT * Follows five consecutive interest rate increases * Central bank minutes nearly identical to prior text BRASILIA Oct 17 (Reuters) - Brazil's central bank hinted it will continue to hike interest rates to battle inflation that remains persistently high despite a stronger local currency, the bank said in its most recent rate-setting meeting minutes released on Thursday. The central bank raised its benchmark Selic interest rate for the fifth straight time last week, keeping the pace of monetary tightening steady in a bid to control rising inflation expectations. The bank repeated almost the same language from the previous minutes in a sign that policymakers could extend the rate-hiking cycle. "There is really no difference between this and the last minutes and that signals that they intend to keep the pace of rate hikes, meaning another 50 basis points at the next meeting," said Gustavo Rangel, chief Latin America economist for ING in London. "The scenario has not changed enough for them to change guidance. They remain relatively hawkish, which is good because it will help the bank consolidate a more benign outlook for inflation," he said. Between the previous rate decision meeting and the last one the Brazilian real firmed more than 7 percent. A stronger real eases inflation by lowering the price of imported goods. The bank's monetary policy committee unanimously voted to hike the Selic rate by 50 basis points to 9.50 percent on Oct. 9 to reduce inflationary pressures that threaten a slow-moving recovery in Latin America's largest economy. A growing number of economists are predicting the central bank will take the Selic back to double digits this year, considered by many a setback for President Dilma Rousseff, who vowed to bring down some of the world's highest interest rates. For years, lower interest rates has been a priority of Rousseff, who is widely expected to run for re-election next year. A history of rampant inflation has made it difficult for policymakers to keep interest rates down in Brazil. Link this Share this Digg this Email Reprints

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