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Inflation Rises More Than Expected in Brazil

Brazil’s inflation in mid-February exceeded economists’ expectations for the eighth consecutive month, adding pressure on the central bank to raise interest rates. Swap rates rose.

Prices as measured by the IPCA-15 price index rose 0.68 percent from Jan. 16 through Feb. 14, the national statistics agency said today. The median estimate from 38 analysts surveyed by Bloomberg was for a 0.62 percent increase. Annual inflation accelerated to 6.18 percent from 6.02 percent the previous month.

Inflation has exceeded the central bank’s 4.5 percent target for more than two years as Dilma Rousseff’s government spurred demand by extending tax breaks for consumer goods and pressuring banks to lower lending rates. With inflation running faster than Chile, Peru, Colombia and Mexico, the bank’s ability to keep its benchmark lending rate at a record low 7.25 percent to boost growth is being put to the test.

“Today’s number shows inflation is very worrisome, it remained rather high even with the reduction in electricity rates,” Newton Rosa, chief economist at SulAmerica Investimentos, said by telephone from Sao Paulo. “Inflation is distancing itself more and more from the center of the target and without a doubt could prompt the central bank to act.”

Swap rates on the contract maturing in January 2014, the most traded in Sao Paulo today, rose six basis points, or 0.06 percentage point, to 7.73 percent at 9:15 a.m. local time. The real strengthened 0.3 percent to 1.9664 per U.S. dollar….”

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