Devaluation in line with other currencies.

Brazil Agency At a lunch with business leaders in São Paulo, the president of the Central Bank (BC), Alexandre Tombini, said today (21) that the appreciation of the dollar in recent weeks is widespread and that the devaluation of the real, which fell 2,2% between January and April of this year, is occurring in line with other world currencies.

"What is happening today is a process driven by the international situation, the appreciation of the US dollar against the vast majority of currencies," said Tombini.

Responding to questions from business leaders about the equilibrium point for the exchange rate, Tombini did not give specific figures, but stated that the Central Bank is taking a series of measures to prevent an excessive inflow of dollars into the country. "I reiterate that we have instruments to ensure that the exchange market, in its various segments, functions normally. Whenever we identify dysfunction in this market, the Central Bank will intervene to ensure that it functions properly," he emphasized.

According to the president of the Central Bank, the impact of the dollar's rise on inflation will be moderate. “What we have seen over the years in the inflation targeting regime is that this pass-through, in Brazil, has been decreasing over time. Today, it is in the range of 3% to 4% in the short term and 8% in the medium term. Our assessment, so far, is that the pass-through is moderate,” said Tombini, who ruled out changes to the inflation targeting regime. “There is nothing on the horizon, neither next month nor next year, regarding changes to the targeting regime.”

Regarding inflation, Tombini said it should be lower this month and in the coming months than what was recorded in April of this year. According to him, inflation will tend to converge towards the center of the target. “After that peak in inflation in September 2011, when inflation measured by the IPCA [Broad Consumer Price Index] reached around 7,30%, it decreased and, in April, reached the 5,1% range. There was a drop of more than 2 points in these last seven months,” he stated.

Tombini also predicted that the default rate should fall in the second half of this year and that the country's growth should accelerate during the same period. "Certainly, in 2013, the Brazilian economy will grow more than it will this year," he said.