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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (47318)	3/11/2009 12:40:57 AM
From: elmatador	Respond to of 219724

We never ever had low inflation low interest rates. This is a first. Government scared of sudden drop of: Industrial production. Electricity consumption Government has presidential election next year. Economy must not go down Lula has 84% approval. Politicos love a high approval rate..

To: Haim R. Branisteanu who wrote (47318)	3/11/2009 12:56:52 AM
From: elmatador	Respond to of 219724

Interest rates are still 12.75%, CB says it will drop only 1%. Brazil need to drop to at least, 9%. Then economy will go on overdrive. Meirelles May Cut Brazil Interest Rate to 11.25% After GDP Drop Share \| Email \| Print \| A A A By Andre Soliani March 11 (Bloomberg) -- Brazil’s central bank will probably cut its benchmark interest rate by the most in five years after a record contraction of Latin America’s biggest economy. Policy makers, led by President Henrique Meirelles, will lower the so-called Selic rate to 11.25 percent from 12.75 percent, according to 26 of 49 economists surveyed by Bloomberg. The others expect cuts ranging from a full point to two percentage points. The central bank is seeking to revive growth as record job losses and plunging output threaten the government’s 4 percent growth target. Brazil’s economy will probably contract in 2009 for the first time in 17 years as commodities become cheaper and demand falls, according to Alexandre Lintz, chief strategist at BNP Paribas in Sao Paulo. “The question now is not if, but when, the benchmark interest rate will reach a record low,” Robert Padovani, chief economist at Banco WestLB AG in Sao Paulo, said in a phone interview. “The country is heading toward recession.” At the central bank’s last meeting in January, policy makers reduced the overnight interest rate for the first time in 16 months to 12.75 percent as reports indicated that the economy had come to a standstill. A cut of 150 basis points would be the biggest since 2003. Padovani expects the rate will be cut to a record 9.75 percent by June. Policy makers last cut the rate to a record low of 11.25 percent in September 2007 and kept it at that level until April 2008. A basis point equals 0.01 percentage point. Shrinking Economy Since the bank’s Jan. 20-21 policy meeting, unemployment jumped the most in seven years and industrial output has plunged. After the government’s March 6 report showing output fell 17 percent in January from a year earlier, traders increased bets that the bank would accelerate the pace of rate cuts. Yesterday, the national statistics agency said that Brazil’s gross domestic product fell 3.6 percent in the fourth quarter from the previous three-month period, the biggest drop since the series started in 1996. The drop exceeded forecasts from all 31 analysts surveyed by Bloomberg. After the report, Finance Minister Guido Mantega said the government’s 4 percent growth target would be hard to attain. A new forecast will be released March 20, he said. ‘One More Reason’ “The GDP number is one more reason to cut 150 basis points,” Jose Francisco de Lima Goncalves, chief economist at Banco Fator SA, said in a phone interview. “The recession is here and it makes no sense to keep the rate above 10 percent.” Goncalves said he plans to revise his current 0.5 percent growth forecast for this year to a negative number. Yields on interest rate futures fell yesterday, with the contract for January 2010 delivery declining to 10.09 percent. The quarter-on-quarter contraction was the first for Brazil in three years as the first global recession since World War II saps demand and investment both at home and abroad. Empresa Brasileira de Aeronautica SA, the world’s fourth- largest aircraft maker, cut 20 percent of its workforce after the outlook for sales dropped. Automakers in Brazil have dismissed 7,800 workers since the crisis started, according to Anfavea, the country’s automaker association. ‘Rock Bottom’ Companies eliminated jobs in January, the first time in at least seven years that positions were cut in the first month of a year, after cutting a record 655,000 government-registered jobs in December. “Brazilian companies will keep cutting jobs and output; we haven’t hit rock bottom yet,” Paulo Mateus, economist at Barclays Capital Inc. in Sao Paulo, said. “Brazil’s most effective tool against the economic slowdown is to cut the rates that are restricting growth.” Brazil’s annual inflation rate has slowed from a three-year high in October. A government report today will probably show the annual inflation rate at 5.9 percent in February, according to the median of 20 forecasts in a Bloomberg survey. “The combination of a sharper-than-expected decline in activity and the slowdown in inflation gives the central bank the scope for quite aggressive monetary easing in the short term,” Neil Dougall, chief economist for emerging markets at Dresdner Kleinwort in London, said in a telephone interview. The central bank targets an annual inflation rate of 4.5 percent, plus or minus two percentage points. To contact the reporter on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net Last Updated: March 10, 2009 23:00 EDT