Loading ...Brazil May Cut Rates to 11.25% in 2009, Brown Brothers Says
By Fabio Alves
Dec. 2 (Bloomberg) - Brazil’s central bank may lower the benchmark lending rate by as much as 2.5 percentage points in 2009 because of the slowdown in Latin America’s largest economy, according to Brown Brothers Harriman & Co.
“With the economy slowing, we think the bank will reverse course and start cutting rates in Q1,” Brown Brothers Harriman senior currency strategist Win Thin wrote in a note to clients.
Brazil’s industrial output expanded 0.8 percent in October from a year earlier, the slowest pace since December 2006, the national statistics agency said today. The country is now expected to grow 2.8 percent in 2009 from an estimated 5.2 percent this year, according to a central bank survey of 100 economists published yesterday.
The central bank halted six months of interest-rate increases in October, leaving the benchmark overnight rate unchanged at 13.75 percent. The next rate-setting meeting is scheduled for Dec. 9-10.
Thin expects the benchmark rate to fall to 11.25 percent next year. Brazil economists predict the central bank will cut the rate by a quarter point in 2009 to 13.50 percent, according to the central bank survey, which was conducted before the worst- than-expected output data was released.
Thin also predicts the real will trade between 2.20 and 2.50 per dollar in the fourth quarter.
The real fell 2.1 percent to 2.387 per dollar at 10:44 a.m. New York time after earlier sinking to as low as 2.422 per dollar.
Source: Bloomberg.
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