* Inflation expectations for post-2015 have dropped - Tombini
* Reiterates c.bank to stay vigilant in inflation batte (Recasts, adds Tombini comments and context)
By Guillermo Parra-Bernal and Alonso Soto
SAO PAULO/BRASILIA, July 1 (Reuters) - A “substantial” drop in inflation expectations in Brazil shows that monetary policy is yielding results, central bank president Alexandre Tombini said on Wednesday, sounding more upbeat about policymakers’ progress in fighting stubbornly high prices.
In a speech to business executives in São Paulo, Tombini reiterated the bank will remain vigilant to bring the inflation rate back to the 4.5 percent target by late 2016, and guaranteeing “its stability for coming years.”
Currently, the annual rate is nearly 9 percent.
“The improvement in expectations for after 2015 shows the success of monetary policy,” said Tombini, without making reference to the bank’s standard message that progress in battling inflation is still not sufficient.
After hiking the benchmark Selic rate by 275 basis points since October, pressure is mounting on central bank poliymakers to ease the tightening and avoid further harm to an economy headed into its worst recession in 25 years.
The bank last week toughened its tone, signaling it was going to keep raising rates for some time to bring inflation down to the target level.
Some market traders started to bet that the bank could hike rates by an extra 100 basis points to 14.75 percent this year.
However, analysts said they believe the central bank is making attempts to ease that hawkish stance, based on what was said in private talks with investors earlier this week.
Although inflation expectations for 2015 have climbed to 9 percent, economists see inflation in 2016 coming down to 5.5 percent and 4.5 percent in 2017 and beyond. (Reporting by Guillermo Parra-Bernal; Writing by Alonso Soto and Caroline Stauffer; Editing by Leslie Adler and Richard Borsuk)