MEXICO CITY, Oct 12 (Reuters) - Brazil might have to raise interest rates to keep a lid on inflation expectations as economic growth rebounds, the International Monetary Fund said on Friday.
The Brazilian central bank cut rates to a record-low 7.25 percent on Wednesday and analysts and officials are divided over whether hikes will be needed next year.
The IMF expects growth to bounce back in 2013 and reach 4 percent, while inflation is forecast at 5.1 percent in 2013, above the 4.5 percent center of the central bank’s target range.
“As the recovery strengthens, timely unwinding of policy stimulus may be required to anchor inflation expectations more firmly in some countries (e.g., Brazil and Uruguay),” the IMF said in its latest regional report on Latin America.
Brazilian Finance Minister Guido Mantega has said there is no need to raise rates next year. But a central bank official said it would not hesitate to hike if inflation were to rise above the 6.5 percent ceiling of the target range. Inflation was 5.28 percent in September and interest rate futures pricing suggests investors expect a 50-basis-point rate hike in July 2013.
Uruguay raised its benchmark rate to 9 percent last month.