EMERGING MARKETS-Brazil rates up on 'hawkish' central bank minutes

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
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