* Rousseff says inflation is a result of supply shocks
* Comments cause interest rate futures to sell off
* Investors see lower chances of imminent interest rate hike
March 27 Brazil's President Dilma Rousseff on
Wednesday said she will not support policies that attempt to
curb inflation by lowering economic growth, pouring cold water
on market expectations that the central bank was ready to
tighten monetary policy.
"I don't agree to policies to fight inflation that look into
reducing economic growth," Rousseff said in comments to
reporters in South Africa, where she is attending a meeting of
BRICS countries, broadcast by Brazilian government TV.
"Last year we had low economic growth, but inflation rose
because we had a supply shock," she added, repeating one of the
arguments recently used by the central bank to justify keeping
Brazil's base Selic rate at an all-time low of 7.25 percent even
as inflation neared the ceiling of a government target.
"There is nothing we can do internally apart from expanding
our production to contain an increase in commodities prices
caused by a decline in the U.S. (grain) harvest," Rousseff said.
Interest-rate futures sold off at Brazil's BM&FBovespa on
Rousseff's comments, which were interpreted as a sign that the
central bank is in no rush to raise interest rates.
Contracts maturing in Jan. 2014 fell 5 basis points
to 7.74 percent, while those maturing in Jan. 2015
dropped 7 basis points to 8.45 percent.
Those contracts had been little changed in the past few days
as investors awaited a key central bank inflation report on
Thursday to reassess their bets on the base Selic rate.
"Any comments from the central bank will have less weight
now that you have the perception that the one in charge of
economic policy is the Planalto," said Silvio Campos Neto, an
economist with Tendencias consultancy, referring to the
Rousseff said Brazil has moved beyond policies that try to
curb prices by lowering economic growth, but assured that the
government is closely monitoring inflation.
"We don't believe inflation is out of control. On the
contrary, we believe it is under control that what is happening
are temporary fluctuations," she said.