RIO DE JANEIRO Feb 15 Brazil's Finance Minister
Guido Mantega on Friday expressed concern about Brazil's
inflation rate, fueling market bets that the central bank could
raise interest rates this year.
Mantega, who is in Moscow for a meeting of the G20 group,
said that "inflation above the center of (the government's)
target raises a yellow flag," according to a report published on
the Web site of Valor Economico's website.
"Fortunately, it has been under control for the past few
years," he added, arguing that inflation has been pressured by
seasonal factors, such as higher food prices, rather than
Brazil targets inflation of 4.5 percent, with a tolerance
band of 2 percentage points up or down. In the 12-month period
through January, consumer inflation rose to 6.15 percent, the
highest reading in a year.
The minister also said the central bank needs to be
"vigilant" and will take measures if inflation does not ease
"spontaneously," according to Valor.
Mantega said monetary policy, and not the foreign exchange
rate, is the right instrument to fight inflation, in a possible
attempt to quell speculation that the government would allow the
real to strengthen to cheapen the cost of imported goods.
His comments drove interest rate futures sharply higher as
investors increased bets the central bank could soon lift the
Selic rate from its current all-time low of 7.25 percent.
The contract maturing January 2014 soared 18 basis
points to 7.57 percent.