(New throughout, adds more Tombini comments)
BRASILIA Aug 5 Brazil is far from stagflation,
central bank chief Alexandre Tombini said on Tuesday,
forecasting the economy will pick up speed and inflation will
ease in coming months.
"We certainly cannot speak of a crisis," Tombini told
lawmakers at the Senate's economic affairs committee. "I want
inflation to be lower than it is now, but it remains under
Tombini's remarks are at odds with the view of some
economists and investors, who have noted recently that inflation
is running above the central bank's target range and economic
growth has ground to a near halt.
President Dilma Rousseff's main contender in the October
presidential election, senator Aecio Neves, has recently
described this outlook as one of "stagflation".
In Tombini's view, monetary policy is helping control
inflation pressures, which should fade over the next year. He
also said economic growth will recover in the second half of
However, yields on interest rate futures rose in the Sao
Paulo exchange as traders expected inflation to stay high, which
could prompt the central bank to raise interest rates further.
Tombini did not speak of possible rate hikes, but he
reiterated that the bank is not considering reducing its
benchmark Selic interest rate in the near future from its
current 11 percent.
Tombini also said there is no contradiction between high
interest rates and the recent measures that injected up to $20
billion in credit into the country's ailing economy.
The credit stimulus, aimed at ensuring financial stability,
is known as "macroprudential measures." When risks to the
banking sector subside, the central bank may allow more credit
to flow into the economy, Tombini said.
Tombini reckoned investments are growing at a slower pace
than last year, but said they are set to recover in the longer
term. His forecast for economic growth in 2014 is 1.6 percent,
slower than the 2.5 percent GDP growth in 2013.
Tombini also acknowledged that the Brazilian industrial
production is at risk of contracting in 2014.
(Reporting by Luciana Otoni and Alonso Soto; Writing by Silvio
Cascione; Editing by James Dalgleish and Dan Grebler)