Mantega sees Brazil inflation falling

Brazilian Finance Minister Guido Mantega said here Thursday that he expected inflation to fall this year on the back of lower commodities and food prices.

"Inflation will fall in Brazil," he told reporters after a meeting with business leaders at the headquarters of the powerful Federation of Industries of the State of Sao Paulo (FIESP).

In March, experts were alarmed when it was confirmed that 12-month inflation reached 6.59 percent, above the official target's upper limit of 6.5 percent.

Mantega attributed that surge to high commodities prices due to a drought in the United States and Brazil.

But noting that commodities and food prices were now falling, he added: "We have perfect conditions to reduce inflation."

Earlier this month, the Central Bank raised its benchmark interest rate by 0.25 points to 7.5 percent, the first hike since July 2011 with the aim of controlling inflation.

Analysts agree that the rate is likely to be pushed up to 8.5 percent by year's end.

But there have been widespread fears that new interest rate hikes could act as a brake on the country's sluggish GDP growth, which was 0.9 percent last year, the worst performance in three years.