* Bank chief dismisses idea of growth goal, eyes inflation
* Traders increasing bets on interest rate hike this year
* Tombini says currency not a tool for growth or prices
SAO PAULO, Feb 24 (Reuters) - Brazil’s central bank sets monetary policy based upon inflation, not any economic growth target, bank president Alexandre Tombini said in an interview published to the Wall Street Journal’s website on Sunday, as expectations mounted of a possible interest rate hike this year.
Brazil’s 12-month inflation rate has climbed above 6 percent in recent months, near the ceiling of the official inflation target, stoking expectations that the central bank could tighten monetary conditions despite a faltering economic recovery.
“Our goal is inflation, so we have to adjust and calibrate our policies to meet our goals,” Tombini said in the interview held on Saturday. “Growth is not a goal for the central bank.”
A central bank spokesman could not be reached for comment.
Inflation slowed less than expected through mid-February, as food costs and a tight job market pressured prices even after two years of disappointing economic growth.
“Inflation in the last few months has shown more resilience than we’d like it to show,” said Tombini. “We’re keeping a very close eye on these developments.”
The bank’s next rate-setting meeting concludes March 6.
Yields on Brazilian interest rate futures have climbed in recent weeks as stubborn inflation and Tombini’s hawkish tone spur forecasts of an interest rate increase later this year - the first since 10 straight rate cuts took the policy rate to an all-time low of 7.25 percent.
Brazil began that rate-cutting cycle in August 2011, when its double-digit interest rates were luring hot capital flows into its financial markets, pushing up the value of the local currency, the real.
The central bank’s interventions in the foreign exchange market since then have given many investors the impression that the government was trying to weaken the exchange rate to support local industry as part of a so-called global currency war.
“I don’t think this is a war for Brazil to fight at this moment,” Tombini said in the weekend interview.
He said the central bank worked to “shave off” volatility in the foreign exchange market and he did not expect another currency swing like last year, when the real lost nearly 10 percent against the U.S. dollar.
“I don’t see the market driving the real that way,” he said.
Tombini also dismissed the idea that the real’s recent strengthening was part of a government effort to fight inflation by cheapening imports.
“None of that is the reality,” he said. “ exchange rate is not an instrument either to combat inflation or to sustain economic growth.”
The central bank targets annual inflation of 4.5 percent, with a tolerance range of 2 percent in either direction.