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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 (49257)	4/29/2009 1:47:12 PM
From: elmatador	Respond to of 217942

Meirelles May Cut Brazil Rate for a third straight time today to a record as it seeks to prevent the economy from contracting this year. By Andre Soliani April 29 (Bloomberg) -- Brazil’s central bank will probably cut its benchmark interest rate for a third straight time today to a record as it seeks to prevent the economy from contracting this year. Policy makers, led by bank President Henrique Meirelles, will lower the so-called Selic rate to 10.25 percent from 11.25 percent, according to 40 of 56 economists surveyed by Bloomberg. The others expect cuts ranging from 0.75 percentage point to 1.5 points. “We are heading to single digit interest rates, if not now, then in the next meeting,” Marcelo Carvalho, chief Brazil economist for Morgan Stanley, said in a telephone interview from Sao Paulo. The central bank is seeking to revive growth as record job losses and plunging output threaten the government’s 2 percent growth target, a goal already cut from 4 percent at the start of the year. Brazil’s economy will shrink 4.5 percent in 2009, according to Morgan Stanley. That would be the largest contraction in at least 61 years, according to figures from the national statistics agency. Policy makers will announce their decision today in Brasilia after 5 p.m. New York time. They have lowered the rate twice from 13.75 percent at the start of the year, with cuts of 100 basis points in January and 150 basis points last month. A basis point equals 0.01 percentage point. Slowing Inflation “Falling inflation opens room for further interest-rate cuts,” Carvalho said. Brazil’s broadest measure of inflation, the so-called IGP-M price index, fell 0.15 percent this month, the Getulio Vargas Foundation said today in report posted on its Web site. The index, which measures consumer, construction and wholesale prices, has dropped in three of the first four months of 2009. Even after this year’s cuts, Brazil’s real interest rate -- the rate minus inflation -- is the fourth highest among 53 economies tracked by Bloomberg. Brazil’s annual inflation rate, as measured by the benchmark IPCA-15 index, fell to 5.4 percent in mid-April, an 11-month low. Economists expect inflation to slow to 4.3 percent by yearend, according to the median forecast in a central bank survey of about 100 analysts published April 27. The bank targets inflation of 4.5 percent, with a leeway of plus or minus two percentage points. “Given that the inflation outlook remains below the mid- point of the target for this year and next, there is room for the interest rate to drop to levels similar to other emerging markets,” Alexandre Sant’Anna, economist at BNY Mellon Arx, said in a telephone interview. Mexico’s benchmark rate is at 6 percent, Chile’s was lowered to 1.75 percent this year and Peru’s rate is 5 percent. Slower Inflation Brazil’s inflation rate, which exceeded 5,000 percent in 1990, has more than halved since President Luiz Inacio Lula da Silva took office in 2003. The benchmark interest rate was 25 percent at the beginning of Lula’s first term. Policy makers may slow the pace of rate cuts because of signs an economic recovery may be beginning. Lula on April 27 said the economy is responding to government stimulus measures and showing signs of “improvement.” Lula has cut taxes on car sales, construction materials and home appliances, lowered borrowing costs, injected about $90 billion in currency and money markets and pledged to carry out planned public works even as government revenue erodes. Companies slashed a record 655,000 jobs in December then rehired 35,000 workers last month. Car sales climbed 17 percent in March from a year ago, according to Brazil’s automakers’ association. Bank lending also rebounded in March, after falling for the first time in five years in February. “New data show firmer economic activity in the short run and removes the urgency for more aggressive cuts,” Rodrigo Valdes, chief Latin American economist at Barclays Capital, said in a phone interview from New York. “Fiscal policy has been very active, replacing the need to overly front-load rate cuts” To contact the reporter on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net