Brazil faces 2013 inflation, interest rate challenges -Loyola

Tom Murphy & Luciana Magalhaes – Dow Jones/NASDAQ, 03/19/2012

Former Brazilian Central Bank President Gustavo Loyola. (Elza Fiúza/ABr)

Brazil’s central bank has all but abandoned the goal of pulling inflation down to 4.5% this year or next, with inflationary pressures likely to bring a round of interest rate increases in 2013, according to former central bank president Gustavo Loyola.

“We’ve looked at inflation from every angle–demand, services and every other- -and I don’t see how Brazil is going to bring inflation down to 4.5% in 2012 or even in 2013,” Loyola told Dow Jones Newswires in an interview. “The central bank’s directors may have a goal in mind, but it seems increasingly clear they are no longer pursuing 4.5%.”

Under Brazil’s inflation-targeting program, the country is committed to a goal of 4.5% inflation in 2012 and next year. The program permits a tolerance range of two percentage points, allowing for inflation of up to 6.5%.

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