February 25, 2013 / 7:10 PM / 5 years ago

UPDATE 1-Brazil central bank to step into forex if needed -Tombini

NEW YORK, Feb 25 (Reuters) - Brazil’s central bank will step into markets if necessary to control excessive currency movements, the bank’s chief said on Monday, adding that policymakers are working to steer inflation expectations back to the bank’s official target despite stubborn price increases.

Brazil’s real has appreciated in recent weeks, sparking speculation that policymakers are willing to let the currency strengthen to help dampen price increases. The country had a history of runaway prices in decades past, and voters have long memories of those years.

“We will react to any disruptions in the foreign exchange market,” bank chief Alexandre Tombini said at a New York event.

“We might step in to shave off excessive volatility in foreign exchange markets,” he cautioned.

The real has gained almost 4 percent against the U.S. dollar this year, after dropping against the greenback in 2012.

Brazil’s central bank targets inflation at 4.5 percent, plus or minus 2 percentage points.

While 12-month inflation has stayed just below the top of that range, the bank has struggled to bring the rate closer to 4.5 percent.

That has stoked expectations the bank could tighten monetary policy despite a faltering economic recovery.

Economists still expect 2013 inflation to clock in at 5.69 percent, according to the latest central bank survey.

“Now we have to get back to re-anchoring of inflation expectations,” Tombini said.

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