MercoPress. South Atlantic News Agency

Brazil committed to contain inflationary expectations.

Brazil Central Bank president Henrique Meirelles said that the bank had been successful in containing inflationary expectations adding that the prices index increase since the beginning of the year “had not damaged long term prospects”.

"The Central Bank has been successful in coordinating inflation expectations", said Mr. Meirelles during the monetary policy institution fortieth anniversary celebrations. "The evolution of inflation since the beginning of the year has not contaminated long term inflation expectations", he added.

Mr. Meirelles were made when the Open Market Board of the Central Bank is deciding whether to further increase in April the interest rate basic reference, or Selic, which has been augmented for seven months running and now stands at 19,25%.

This week the Central Bank increased its inflation projection for the current year from 5,1 to 5,3%, but simultaneously it reduced 2006 inflationary projections from 4 to 3,8%, which means that the continuous interest rate increases could help keep inflation below the 4,5% target for next year.

However Mr. Meirelles insisted he has the strong commitment of ensuring inflation remains inside the government's targets.

"The debate about the targets system is legitimate and useful, and should be encouraged, but this should not generate doubt about the unbending commitment of the Central Bank with the objectives announced by the Monetary Council", pointed out Mr. Meirelles.

Last February Brazil managed a primary budget surplus of over 4 billion Reales, (approx. 1,47 billion US dollars), lower than forecasted, following a jump in social security costs, according to data released by the Central Bank last Monday.

However the February primary surplus, (which excludes interest payments) was higher than a year ago, 3,3 billion Reales. Economists had anticipated a surplus of 4,5 billion Reales.

The primary surplus is an index indicative of a country's capacity to honour debts.