Brazil must remain vigilant in inflation battle: Levy

"When you talk about 8 percent inflation, that includes the first three months in Brazil where you have a lot of realignment of prices," Levy said at an event sponsored by Bloomberg. "The central bank has to be vigilant, especially as you go through adjustments so that expectations are anchored at 4.5 percent."

Vigilance has been the key word used by central bank chief Alexandre Tombini to signal interest rates will continue to rise to slow inflation that accelerated to above 8 percent in March, its fastest pace in more than 11 years. The bank has raised its benchmark Selic rate by 175 basis points since October to 12.75 percent.

Levy said the high inflation rate is hurting the poor and businesses at a time when Brazil is trying to regain the confidence of investors to avoid losing its coveted investment grade credit rating.

He acknowledged investors are worried with transparency after revelations of corruption at Petrobras , but said the government will appoint new board members to the state-run oil company based on technical skills and not political sway.

Levy said he is confident the government will meet its primary budget surplus target of 1.2 percent of gross domestic product this year. To do that, Levy repeated that the government will limit spending to 2013 levels.

Social security spending should also be monitored to make sure its does not surpass certain levels, Levy said.

(Reporting by Daniel Bases and Jonathan Spicer in New York; Writing by Alonso Soto; Editing by Alan Crosby)