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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: Steve Fancy who wrote (15413)	5/20/1999 12:05:00 AM
From: wl9839	Read Replies (1) \| Respond to of 22640

Same Interest Rate Story-WSJ Slant DJ Brazil Ctrl Bk Cuts Benchmark Selic Rate To 23.5% Vs 27% Dow Jones Newswires SAO PAULO -- Brazil's central bank on Wednesday cut its benchmark Selic rate to 23.5% from 27%, in a move widely anticipated by financial markets. This is the fourth time in three weeks the central bank has cut rates. The monetary authority has cited lower-than-expected inflation, an improved fiscal situation, and increasing foreign capital inflows as the main factors allowing for the trend. Following a three hour meeting of the Monetary Policy Committee, or Copom, the central bank also decided to maintain a downward bias for rates. Through this mechanism, central bank president Arminio Fraga may cut rates at his discretion without having to convene a special Copom meeting. The next Copom meeting is scheduled for June 23. Interest rates have been gradually falling since early March, when Fraga took office. His first move as central bank president, however, was to hike rates to 45% from 39%, in a effort to contain the inflationary pressure that resulted from the devaluation of the real in January. Fraga also introduced the bias mechanism to Brazil. At a news conference, central bank monetary policy director Luiz Fernando Figueiredo said the decision Wednesday to cut the Selic interbank rate was based on three facts. He cited a downward trend in inflation, Brazil's fiscal performance in the first quarter, and continued foreign capital inflows of "improved quality." Of the three, Figueiredo said inflation was the central bank's "main focus." "Market expectations today are that the monthly inflation average over the next four months will be below 0.5%," he said. As reported, the independent Getulio Vargas Foundation announced Wednesday that Brazil actually showed deflation of 0.25% in the period April 21-May 10, compared with the average for the previous four weeks. "If the scenario continues to improve, we can use the (downward) bias," he added. The central bank has used the mechanism several times over the past two months to make interim cuts in the Selic. Asked about recent woes in Argentina - as unfounded rumors surfaced Wednesday that country would abandon the peso's peg to the dollar - and the U.S. Federal Reserves's decision to adopt a tighter monetary policy bias, Figueiredo said the central bank is "always looking at facts in a preventive way." He said the worries about Argentina and the Fed's decision on rates were discussed by the Copom, "as everything was," but that they didn't weigh on the Copom's decision-making process. "I can see the pothole two kilometers down the road, but I don't have to change my course now," Figueiredo said. "If the Fed hikes rates, it doesn't mean that foreign capital inflows into Brazil will change," he said, adding that as the quality of foreign capital inflows into Brazil have been improving, Brazil's dependence on short-term capital is diminishing.