Brazil’s swap rates dropped to an 11-month low as a report indicating slower-than-forecast inflation added to speculation that policy makers will limit further increases in borrowing costs.

Swap rates on contracts maturing in January 2017 declined six basis points, or 0.06 percentage point, to 11.07 percent at 2:07 p.m. in Sao Paulo, the lowest on a closing basis since August 2013. The real advanced 0.4 percent to 2.2120 per dollar.

While the 6.51 percent increase in consumer prices in the 12 months through mid-July was the biggest in a year and exceeded the central bank’s official target, inflation was slower than the 6.56 percent median forecast of economists surveyed by Bloomberg. Policy makers held the target lending rate at 11 percent for a second straight meeting on July 16 after nine consecutive increases to curb inflation.

“Inflation is not as fast as some expected, which can be considered positive,” Cristiano Oliveira, the chief economist at Banco Fibra SA in Sao Paulo, said in a telephone interview.

The central bank, which maintains an annual inflation target of 4.5 percent plus or minus 2 percentage points, is due on July 24 to publish minutes of last week’s policy decision.

Food and beverage prices declined 0.03 percent in the month through mid-July, compared with the prior 0.21 percent increase, the national statistics agency reported today. A 28.6 percent jump in hotel prices during the month-long World Cup soccer tournament accounted for 0.13 percentage point of the headline inflation number.

‘High Level’

“Some people are saying the central bank could start cutting rates,” Roberto Padovani, the chief economist at Votorantim Ctvm in Sao Paulo, said by telephone. “But because inflation is still at a very high level, it’s too early to talk about that.”

The real has rallied 6.8 percent this year, the most among 24 emerging-market currencies tracked by Bloomberg, climbing partly on speculation that President Dilma Rousseff is losing popularity as the October election approaches amid the slowest economic growth in two decades.

Economists lowered their forecast for inflation in 2014 to 6.44 percent, according to the median of about 100 estimates in a central bank survey published yesterday. They cut their growth estimate for an eighth consecutive week, forecasting a 0.97 percent expansion of gross domestic product following a 2.5 percent increase in 2013.

To support the real and limit import price increases, Brazil sold $198.7 million of currency swaps today and rolled over contracts worth $346.5 million. The central bank plans to keep offering $200 million in swaps each business day at least through the end of the year.