(Reuters) -Policymakers at Brazil's central bank on Wednesday stressed that they will do whatever it takes to bring inflation back down to the country's 3% target, while voicing concern about unanchored consumer price expectations.
The central bank in Latin America's largest economy last month delivered a 25-basis-point increase to its benchmark interest rate, bringing it to 10.75%, and is expected to speed up the pace of tightening when its board meets in November.
Brazil's monetary authority has been trying to tackle a challenging inflation outlook driven by stronger-than-expected economic activity.
Central bank Governor Roberto Campos Neto said that it was important to convince investors that policymakers will do "what is necessary" to reach inflation targets, echoing remarks made earlier by Paulo Picchetti, the central bank's international affairs director.
Both men indicated that the central bank would maintain its data-driven approach going forward, and noted they are worried about inflation expectations exceeding the target.
"When you see the inflation de-anchoring and the risk premium where it is today, (those are) signs that worry us a lot," Campos Neto said at an event hosted by UBS.
A poll of private economists showed earlier this week that Brazil's inflation rate is expected to close out the year at 4.5%, hitting the upper-end of the central bank's 1.5%-4.5% target range, and decelerate to 3.99% by the end of next year.
Markets are pricing in an 89% chance that the central bank will hike borrowing costs by 50 basis points next month, while the other 11% point to an even larger increase of 75 basis points.
"We chose to be completely data-dependent" on the next policy steps, Picchetti told an event hosted by XP (NASDAQ:XP), "with a clear commitment to do what is necessary in terms of monetary policy to make inflation converge to the target."
Annual inflation in Brazil hit 4.42% in September.