UPDATE 2-Brazil food prices easing, rate hikes to be felt -Tombini

Wed Apr 16, 2014 12:39pm EDT

(Adds comments from central bank director Araujo)

By Alonso Soto and Tiago Pariz

BRASILIA/SAO PAULO, April 16 (Reuters) - Food prices in Brazil have started to ease and should bring inflation down in coming months, central bank chief Alexandre Tombini said on Wednesday, reinforcing views that policymakers are ready to wrap up their year-long campaign of rate hikes.

He reiterated that a significant part of the impact of past rate increases on inflation has yet to be felt.

"We have worked for inflation to once again remain compatible with the inflation target regime this year," Tombini said in a speech to government officials and business leaders at the presidential palace.

A surge in prices last month has raised worries that annual inflation could end the year above the official target ceiling of 6.5 percent.

Central bank director Carlos Hamilton Araujo said later on Wednesday that monetary policy in Brazil works properly and its transmission to prices remains as efficient as in previous cycles.

Araujo, one of the bank's 8-member committee that decides on monetary policy, reiterated at an event in Sao Paulo that prices still have to react to the recent increase in rates.

Under Tombini the central bank has raised its benchmark Selic rate from record lows of 7.25 percent to 11 percent in a year to battle naggingly high inflation.

Some economists have questioned the strength of monetary policy as the year-long monetary cycle has yet to ease inflation in a country scarred by bouts of hyperinflation in the 1980s and 1990s.

Brazil's rate of inflation in March picked up at the quickest pace in 11 years for that month. In the 12 months through March, consumer prices rose 6.15 percent.

Tombini said exchange rate flexibility and tighter monetary and fiscal policies have helped the Brazilian economy weather the transition in the global economy. (Reporting by Alonso Soto; Editing by Chizu Nomiyama and Meredith Mazzilli)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.