* Brazil consumer inflation above all estimates in a Reuters
* Interest-rate contract maturing Jan 2015 hits 1-1/2 month
* Yield curve steepens in sign of future inflation problems
By Walter Brandimarte
RIO DE JANEIRO, Jan 23 Brazil's interest-rate
contracts rose on Wednesday after data showed consumer inflation
started the year well above market estimates, suggesting the
central bank may be forced to raise interest rates down the
The domestic yield curve steepened, with the interest rate
contract maturing in Jan 2015 hitting its highest level
since the end of November, after data showed the benchmark IPCA
consumer price index rose 0.88 percent in the month to
Economists expected the index to climb 0.83 percent,
according to the median of 31 estimates. The highest forecast
was for a 0.87 percent rise.
The contract maturing Jan 2016 climbed 3 basis
points to 8.42 percent.
"The yield curve is steepening further. Medium- and
long-term rates are rising. That's because we don't see any
change in monetary policy in the short term, but inflation
problems are piling up," said Silvio Campos Neto, an economist
with Tendencias, a consultancy in Sao Paulo.
Brazil's central bank is widely expected to leave the base
Selic rate at its current all-time low of 7.25 percent for a
"prolonged period" as it tries to boost a faltering economic
recovery without adding to inflation pressures.
But many economists fear that low interest rates alone will
do little to support Brazil's growth, while fueling inflation
that already runs well above the center of a 4.5 percent
government target -- which includes a tolerance margin of 2
Tendencias currently forecasts Brazil's consumer inflation
to close 2013 at 5.8 percent. "But there are upside risks to
that forecast," said Campos Neto.
With an expected increase in fuel prices in the next few
weeks, Brazil's inflation will likely remain under pressure in
the next couple of months.
But members of President Dilma Rousseff's economic team
estimate it will then start to gradually ease, converging to the
center of the government target "in a more linear way."
Such a forecast has still not convinced analysts, however.
"That sounds like a very optimistic scenario, considering
all the factors we have seen," said Tendencias' Campos Neto.