By Luciana Otoni
CURITIBA, Brazil Feb 13 Brazilian central bank
director Carlos Hamilton Araujo on Thursday underscored that
interest rates were the bank's tool to curtail high inflation,
apparently signaling more monetary policy tightening ahead.
Araujo, the bank's director of economic policy, said at an
event in the southern city of Curitiba that consumer inflation
has remained high, resisting a drop.
The central bank has raised its Selic rate 325 basis points
to 10.50 percent since April in a bid to tame a surge in prices
that threatens to cool an already fragile economic growth. The
bank is expected to raise rates once again on Feb. 26.
Recent market volatility buffeting emerging nations has
weakened the Brazilian real currency, raising pressure on
inflation that remains at the upper end of the official range of
between 2.5 percent and 6.5 percent. A weaker real raises the
value of imports.
"The Selic rate is the instrument that the bank has at hand
to deal with inflation," Araujo told reporters, adding that the
country is well prepared to withstand global markets volatility.
He said that a slowdown in inflation in January curbed
inflation expectations, but that they remain high and a
"challenge for monetary policy."
Another factor that could influence monetary policy is
whether the government of President Dilma Rousseff can reduce
public spending after a severe deterioration of the fiscal
accounts, analysts say.
Her government is expected to announce next week its main
fiscal goal for 2014, which investors believe is key to
determine how committed her government is to prudent fiscal
policies. A drought that has raised energy costs could make the
government opt for a smaller fiscal goal.
Araujo reiterated that tighter fiscal policies help monetary
The Brazilian economy will likely grow at a pace similar to
last year, but an improvement in business and consumer
confidence could accelerate activity, Araujo said. Private
economists believe the South American country's economy grew
just above 2 percent in 2013.