(Corrects to say reserves in dollars in last paragraph of story originally published Feb. 25.)
Feb. 25 (Bloomberg) -- Brazil’s inflation will slow in the second half of the year as the country produces a bumper crop of grains and the real doesn’t weaken as it did last year, central bank President Alexandre Tombini said.
“Apart from any major shocks, food inflation should not be as unfavorable as it was last year,” Tombini said at an event today in New York. A 14 percent increase in the output of grains in 2013 will help restrain food prices, he said.
The central bank’s monetary policy committee will hold the target lending rate at a record low for a third straight time next week in an effort to boost growth without further stoking inflation, according to a Bloomberg survey. In the minutes to its January meeting, the bank’s board said it would hold rates for “a sufficiently prolonged period.”
Swap rates on the contract maturing in January 2014, the most traded in Sao Paulo today, rose two basis points, or 0.02 percentage point, to 7.85 percent at 5:39 p.m. local time. The real weakened 0.3 percent to 1.9793 per U.S. dollar.
Brazil’s annual inflation rate through mid-February surpassed economists’ forecasts for the eighth consecutive month, reaching 6.18 percent as measured by the IPCA-15 index.
Inflation has accelerated even after growth slowed in 2012 for a second consecutive year to 1 percent, according to estimates by the central bank.
Faster inflation amid faltering growth has led traders to bet policy makers will allow the currency to strengthen in a bid to rein in consumer prices. The real, after posting the second- worst performance among major currencies last year, has led gains among the 16 most-traded currencies in 2013.
Tombini said the government now has more pressing issues in Brazil aside from the so-called currency war, a term coined by Finance Minister Guido Mantega in 2010 to describe policies adopted by rich nations to weaken their currencies.
The annual pace of consumer price increases has exceeded the 4.5 percent midpoint of the central bank’s target range for more than two years, and last year food and beverage prices rose 9.9 percent.
Inflation is showing “more resistance” than policy makers would like, Tombini said.
He reiterated the central bank will maintain its policy of accumulating reserves. Reserves have climbed to $373 billion from $289 billion at the start of President Dilma Rousseff’s administration.
--Editors: Dennis Fitzgerald, Brendan Walsh