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INFLATION IN BRAZIL broke through the central bank’s target of 4.5% plus or minus 2% in April for the first time since June 2005. In a bid to take the heat off prices, policymakers have raised the benchmark Selic rate by 1.25 percentage points this year, to 12%. On May 11 Alexandre Tombini, president of Brazil’s central bank, said he would continue with monetary tightening for a "sufficiently prolonged" period to ensure inflation slows towards its central target in 2012. In this environment, there is much excitement among investment bankers in São Paulo about the possibility of launching inflation-linked paper. "We were the first bank to discuss this structure with issuers," says Andre Silva, co-head of Latin debt capital markets at Deutsche Bank, on a regular visit to São Paulo on May 4.
