Brazil central banker sees 'window' to bring down inflation -report

BRASILIA Wed Oct 2, 2013 4:46pm EDT

BRASILIA Oct 2 (Reuters) - Brazil's central bank sees a window of opportunity to lower inflation until April 2014 because of the high base of comparison from the previous period, the bank's chief, Alexandre Tombini, was quoted as saying by Bloomberg on Wednesday.

His comments were interpreted by some in the market as a hint that the central bank could extend its rate-hiking cycle longer than previously expected.

Tombini also said he wants to bring inflation down in 2014 as close as possible to the midpoint of the official target of 4.5 percent, plus or minus 2 percentage points, according to the Bloomberg report.

In its quarterly inflation report released on Monday, the central bank said inflation was going to remain stubbornly high until the third quarter of 2015, raising market bets that borrowing costs could move back to double-digit territory.

Central bank director Carlos Hamilton Araujo added to those expectations by saying there was still "a lot of work to be done by monetary policy to battle inflation."

Under Tombini, the bank has steadily raised its benchmark Selic interest rate this year to 9 percent in a bid to contain a surge in consumer prices. Most economists expect the bank to end the tightening cycle later this year when the Selic rate reaches 9.50 or 9.75 percent.

"What we have here is that the window to fight inflation goes until April 2014, so investors will interpret that the central bank will raise interest rates until then," said Jankiel Santos, chief economist at Espirito Santo Investment Bank in Sao Paulo, referring to the Bloomberg interview with Tombini.

High inflation has been one of the main political liabilities for President Dilma Rousseff, who is widely expected to run for re-election next year.

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