Brazil’s swap rates climbed as U.S. employment gains prompted traders to step up wagers that the South American country’s central bank will seek bigger increases in borrowing costs as it tries to contain inflation.
Brazil’s government will ease rules that forced it to account for higher spending by states and cities to ensure the country’s fiscal target were met, Treasury Secretary Arno Augustin said today. The measure allows increased spending by federal and local governments.
Brazil’s shorter-term swap rates climbed after an index of wholesale, construction and consumer prices rose more than forecast, spurring speculation the central bank will raise borrowing costs to curb inflation.
Brazil’s central bank signaled it will continue to cautiously cut interest rates to bolster a sluggish economy, as Europe’s debt crisis worsens and inflationary risks remain low. Interest rate futures fell.
Brazil’s swap rates climbed as Finance Minister Guido Mantega said the government will do whatever it takes to fight inflation and signaled an interest rate increase is an option, boosting bets policy makers will raise borrowing costs to control price gains.
Brazil’s swap rates dropped the most in a week after a report showed inflation slowed more than economists forecast, spurring speculation that the central bank will push back an increase in borrowing costs.
Brazil’s central bank said monetary policy requires caution amid a slower-than-expected recovery, signaling policy makers may refrain from increasing borrowing costs in April even as inflation quickens.