* Brazil keeps Selic at all-time low, warns of inflation
* Brazil shorter-dated rates fall, longer-dated rates up
* Chile's Pinera appears to dismiss fears of FX intervention
* Brazil real gains 0.1 pct, Mexico peso up 0.2 pct
By Walter Brandimarte
RIO DE JANEIRO, Jan 17 Brazil's yield curve
steepened on Thursday after the central bank decided to hold the
base Selic rate at an all-time low of 7.25 percent even as it
acknowledged growing risks of inflation.
Short-term interest rates fell or remained flat, with the
contract maturing in Jan. 2014 unchanged at 7.16
percent, after the bank late on Wednesday repeated its position
that keeping the Selic stable for a prolonged period remains the
"best strategy" to curtail inflation.
But longer-term rates climbed higher, with the contract for
Jan. 2015 up 4 basis points at 7.8 percent, on the
perception that inflation will be a problem the central bank
will have to address down the road.
"If the central bank wanted to anchor inflation
expectations, it did not succeed in that statement," said Andre
Perfeito, an economist with Gradual Investimentos in Sao Paulo.
Brazil's consumer inflation closed 2012 at 5.84 percent,
well above a government target of 4.5 percent, but still within
its tolerance margin of 2 percentage points. Prices continued to
gain traction in 2013, complicating President Dilma Rousseff's
bid to spur growth by keeping rates at all-time lows.
The central bank said in its statement after Wednesday's
monetary policy meeting that risks to inflation increased in the
short term. It said a recovery in domestic activity has been
weaker than expected.
LATAM CURRENCIES GAIN
By acknowledging a worsening inflation scenario, the central
bank supported bets on a stronger currency as an instrument to
curb inflation, analysts said.
The Brazilian real gained 0.1 percent to 2.0405
per dollar, within a narrow range of 2.0-2.05 per dollar it has
been trading since the beginning of the year.
Other Latin American currencies also posted gains, with the
Mexican peso up 0.3 percent, as a positive Wall Street
session encouraged investors to take risk in emerging markets.
The Chilean peso rose 0.5 percent to 472.60 per
dollar after President Sebastian Pinera said the central bank
needs to consider the exchange rate's long-term fundamentals
when deciding whether to intervene in the market.
In comments that appeared to dismiss fears of central bank
intervention, Pinera also noted Chile's exports continued to
grow despite the recent strength in the currency.
The Chilean peso gained 8.5 percent in 2012 and 1.3 percent
so far this year.
Latin American FX prices at 1555 GMT:
Currencies daily % YTD %
Brazil real 2.0405 0.15 -0.02
Mexico peso 12.5865 0.27 2.21
Chile peso 472.3000 0.53 1.36
Colombia peso 1766.6500 0.44 -0.04
Peru sol 2.5440 0.12 0.28
Argentina peso 4.9475 0.05 -0.71
Argentina peso 7.5200 -0.27 -9.84