By Carolyn Cohn
LONDON Jan 27 The Brazilian central bank will
fight the effects that the country's weakening currency has on
inflation, central bank chief Alexandre Tombini said on Monday,
hinting policymakers are not ready yet to halt the monetary
Tombini said in a speech in London that the bank has raised
interest rates to fight inflation and weather changing global
financial conditions. He said the bank's action to slow
inflation should help ease inflation expectations.
The central bank raised its benchmark Selic interest rate by
half a percentage point to 10.50 percent earlier this month, but
signaled it may be ready to slow the pace of one of the world's
most aggressive tightening cycles.
Brazil has raised the Selic benchmark rate by 3.25
percentage points since last April.
Tombini acknowledged that inflation in Brazil remains high
but stressed that food inflation is slowing. He said annual
inflation will hover around 5.7 percent in January.
Despite overcoming hyperinflation in the mid-1990s, Brazil's
economy continues to suffer from high inflation when compared to
its regional peers.
A combination of high public spending levels, high
indexation of prices in local contracts and a sharp depreciation
of the country's real currency has contributed to keeping
inflation above 4.5 percent since August 2010. The real weakened
around 13 percent last year against the dollar.
Private economists in a central bank survey, released on
Monday, forecast 2014 inflation at 6.02 percent, well above the
official target midpoint of 4.5 percent.