New York : Brazil's economy is at risk of overheating and the country's currency is overvalued, JPMorgan Chase strategist Ben Laidler said at a conference in New York.
Inflation is accelerating after Brazil's government cut taxes and reduced borrowing costs to a record low of 8.75 per cent to help Latin America's biggest economy emerge from its first recession since 2003.
Latin America's biggest economy expanded two per cent in the last quarter of 2009 from the previous three months, the fastest pace in two years, the national statistics agency said on March 11.
Raising interest
Traders boosted bets on Friday that the central bank will begin raising interest rates as early as next month. Policymakers said inflation may accelerate "markedly" above the midpoint of their target range, according to minutes of their March 16-17 meeting published on Thursday.
The real has gained 23 per cent in the past 12 months, the fourth-biggest advance among 26 most actively-traded currencies in emerging markets.
Laidler said that while overvalued, the currency will keep gaining, driven higher in part as rising local interest rates lure capital to the country. "Our concern is how far that goes," he said.
Consumer prices rose 5.09 per cent in the 12 months through mid-March, the highest rate in 10 months, the national statistic agency said on March 23.
