Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: benwood who wrote (64097)	6/8/2010 10:10:05 AM
From: elmatador	Respond to of 219741

Brazil data fuel fears of overheating economy Ana Nicolaci da Costa BRASILIA Tue Jun 8, 2010 9:02am EDT BRASILIA (Reuters) - Data showing Brazil's economy grew faster than expected in the first quarter has reinforced bets that the central bank will keep raising interest rates to cool red-hot consumer demand and prevent overheating. Gross domestic product numbers showed the economy expanded quickly in the first three months of the year compared to the same period last year, boosting fears rapid growth could fuel inflation in Latin America's largest economy. The numbers bolster the view that the central bank will raise interest rates by another 75 basis points this week to 10.25 percent and could well push the monetary authority to prolong its tightening cycle. Here are some implications of Brazil's first-quarter growth data: * Brazil's economy grew 2.7 percent from the previous three months, above expectations for 2.5 percent growth. It expanded 9 percent on an annual basis, above the median forecast of 8.4 percent in a Reuters survey. * While below China's 11.9 percent growth year-on-year in the first quarter, it is far above Russia's 2.9 percent rate by the same comparison. [ID:nLAG006285] Along with Russia, China and India, Brazil is a member of the so-called BRIC group -- a term coined in 2001 to describe emerging economic powerhouses. * The data support the view that Brazil's economy is at risk of overheating -- a possibility flagged by officials such as International Monetary Fund Managing Director Dominique Strauss-Kahn in recent weeks, who forecast 7 percent growth for Brazil in 2010. * Still, some economists noted that capital spending outpaced domestic consumption in the first quarter, signaling that companies are investing to keep up with surging demand. That bodes well for the inflation outlook in the long run. * The numbers also reinforce expectations that the central bank will have to keep raising interest rates to curb inflation, which remains on track to surpass the center of the government's year-end target of 4.5 percent, plus or minus 2 percentage points. * The central bank raised its benchmark lending rate in April by 75 basis points to 9.50 percent -- the first increase since September 2008. It is expected to raise rates by another 75 basis points on Wednesday to 10.25 percent. * The strong growth numbers may prompt the central bank to extend its tightening cycle beyond the 11.75 percent year-end rate forecast by economists in a weekly central bank survey. * Although Brazilian officials have played down fears of overheating, the government recently made additional cuts to its 2010 budget to help cool demand. * The government, the country's National Industry Confederation and banks have all increased their 2010 economic growth forecasts in recent weeks. * Economists in a weekly central bank survey expect Brazil's economy to grow 6.6 percent this year, far more than the 5.5 percent the government forecasts in its 2010 budget. Some banks, however, are forecasting growth of up to 7.5 percent. * The strong first-quarter GDP data follow more recent data suggesting the economy could be cooling. Industrial production dipped in April from March and economists cut their forecasts for inflation this year for the first time in almost five months in the weekly central bank survey published on Monday. (Editing by Todd Benson)