Brazil’s Meirelles: market misread bank report

* Analysts mistook inflation report as indication for rates

* Cenbank aim is to coordinate inflation bets, not rates

* No discussion of deflation or recession in Brazil

BRASILIA, Aug 13 (BestGrowthStock) – Brazil’s central bank chief
Henrique Meirelles said on Friday the bank had not given wrong
signals to the market prior to its decision to raise interest
rates by less than expected last month.

The central bank raised borrowing costs by 50 basis points
to 10.75 percent on July 21, below wide-spread expectations of
a 75 basis point rise.

Analysts had mistaken a June inflation report as an
indicator of the central bank’s next interest rate move when in
fact it is aimed at giving more in-depth analysis of the
previous monetary policy meeting minutes, Meirelles told a
seminar in Sao Paulo.

“The inflation-targeting system is aimed at coordinating
inflation expectations not interest rate expectations,”
Meirelles said.

In that report the central bank raised 2010 growth
forecasts to 7.3 percent from 5.8 percent [ID:nN30174770].

The economy expanded 9 percent year-on-year in the first
quarter but has shown signs of cooling. Analysts in a weekly
central bank survey see it closing the year with 7.1 percent
growth.

In the minutes explaining the July 21 rate move, the bank
said the economy is settling into a new pattern of slower
growth with reduced risk of inflation. That reinforced some
expectations that July’s rate hike may have been its last
during this current tightening cycle.

Still, Meirelles played down the idea of a sudden economic
slowdown.

“There is no doubt that we are in a growth trend,” he said.
“There is no discussion in Brazil of a possible risk of
deflation or recession.”

(Reporting by Silvio Cascione; Writing by Ana Nicolaci da
Costa; Editing by Raymond Colitt and Andrew Hay)

Brazil’s Meirelles: market misread bank report