Brazil Rate Futures Rise as Inflation Index Surpasses Estimates

Yields on most Brazilian interest- rate futures contracts rose after a gauge of inflation increased more than forecast in September, prompting bets the central bank won’t speed up the pace of interest-rate cuts.

Yields on the futures contract due in January 2013 climbed 14 basis points, or 0.14 percentage point, to 10.36 percent at 5 p.m. New York time.

The IGP-DI inflation index showed prices rose 0.75 percent in September, compared with a 0.61 percent increase in August, according to a report from the Rio de Janeiro-based Getulio Vargas Foundation. Economists had forecast a 0.65 percent increase, according to the median estimate of 38 analysts surveyed by Bloomberg. The real’s 15 percent depreciation last month helped drive price increases, according to Thais Zara, an economist at Sao Paulo-based Rosenberg & Associates Inc.

“The bigger-than-expected jump in the IGP-DI in September already shows the impact of the dollar’s appreciation,” Zara said in a telephone interview. “We had some pressure on prices quoted in dollars.”

The real gained the most in almost two weeks, climbing 2.9 percent to 1.7811 per dollar, from 1.8327 yesterday. It has advanced 5.5 percent this month. The real’s losses in September were the biggest monthly decline in nine years.

Brazil’s central bank cut the benchmark interest rate a half percentage point to 12 percent on Aug. 31 after five increases this year as global economic growth slows.
Inflation Target

Consumer prices rose 7.33 percent in the year through mid- September, exceeding the 6.5 percent upper limit of the bank’s target range for a fifth straight month. Central bank President Alexandre Tombini has pledged to slow inflation to 4.5 percent by the end of next year.

“Moderate” cuts in interest rates will help shield Brazil’s economy from the European debt crisis and are consistent with bringing inflation back to target in 2012, Tombini said at an event in Brasilia today.

An index of commodity prices that the central bank considers most relevant to Brazilian consumer prices rose 7.8 percent in September from August, according to a report posted on the bank’s website yesterday. It was the biggest increase since 2006.