UPDATE 2-Next Brazil pres shouldn’t manipulate FX-Meirelles

Brazil’s central bank president says:

* “Artificial” devaluation would bring inflation

* Short-term fluctuation in inflation outlook normal

* Nobody doubts Brazil committed to inflation target
(Adds quote from Meirelles, background, byline)

By Walter Brandimarte

NEW YORK, April 26 (BestGrowthStock) – Brazil’s next president, who
will take office in 2011 after elections this year, should
refrain from artificially devaluing the currency to keep
inflation in check, the head of the Central Bank urged on

Speaking in New York after a central bank poll showed
another spike in inflation expectations, Henrique Meirelles
said nobody doubts that Brazil is able and committed to reining
in prices.

He said “short-term fluctuations” in market expectations
are normal but that investors still forecast inflation to fall
in Brazil in the next few years.

“It’s important that the next government keep inflation on
target,” he said at an event organized by the Brazilian
American Chamber of Commerce.

“If you try to manipulate the foreign exchange rate, try to
lower it artificially, evidently inflation goes up and you have
an inflation surprise,” he added.

Some investors are concerned that the next Brazilian
president could seek to devalue the country’s currency, the
real (BRBY: ), to boost the competitiveness of the industrial

Inflation expectations have spiked for the 14th straight
time in a weekly poll released on Monday. Economists now see
the benchmark IPCA index at 5.41 percent in 2010, compared with
the forecast of 5.32 percent a week earlier. That is way above
the 4.5 percent center of the government target for this year.

Asked whether anxiety related to Brazil’s elections could
be adding to inflation expectations, Meirelles said he wouldn’t
elaborate on the issue on the eve of a two-day central bank
meeting that will decide on monetary policy in Brazil.

Expectations that Brazilian policy makers will raise
interest rates by 75 basis points to 9.5 percent on Wednesday
increased after Meirelles said during the weekend in Washington
that the bank “will adopt forceful measures to ensure that
inflation converges to the target in the relevant horizon.” For
details see [ID:nN25152368].

Meirelles said he has spoken to Dilma Rousseff, president
Luiz Inacio Lula da Silva’s candidate to succeed him in 2011,
and she has assured him that her government wouldn’t change the
course of economic policy.

“I haven’t been speaking to the other candidates but I’m
sure Brazilian society demands stability,” he added.

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(Reporting by Walter Brandimarte; Editing by James Dalgleish)

UPDATE 2-Next Brazil pres shouldn’t manipulate FX-Meirelles