Loading ...News - Brazil Bank Should Cut Rates, Lula Advisor Says
Dec. 8 (Bloomberg) - Brazil’s central bank has room to cut interest rates from a two-year high to spur growth as inflation slows more than economists expect, said Luiz Gonzaga Belluzzo, an economic advisor to President Luiz Inacio Lula da Silva.
Consumer, wholesale and construction prices, as measured by the IGP-DI, rose 0.07 percent in November, the Getulio Vargas Foundation said today, less than median forecast of 0.33 percent in a Bloomberg survey of 21 economists. The benchmark IPCA inflation index slowed in November, a report showed last week, surprising all analysts who predicted the rate would quicken.
“The reversal in economic expansion is very fast, and the central bank can’t afford to wait and must act with more energy,” Belluzzo, who meets frequently with Lula and his economic team, said in a phone interview from Sao Paulo. “Did you see the IGP-DI today? It collapsed.”
Belluzzo said his call for lower rates will probably be ignored by policy makers this week in Brasilia because of the central bank’s conservative nature. The bank will keep the so- called Selic rate at 13.75 percent at its Dec. 9-10 meeting, according to 32 of 34 economists surveyed by Bloomberg.
“The bank tends to remain conservative and will keep rates unchanged,” he said. “But maybe they will realize that recessionary forces now outweigh inflationary pressures.”
The yield on the most-traded interest-rate future contract fell to an eight-month low and the real fell 3.1 percent.
‘Profound Respect’
Economists covering the Brazilian economy forecast economic expansion will slow by more than half next year to 2.5 percent, according to a Dec. 5 central bank survey published today.
Growth at that rate would be the slowest pace since 2003, when President Luiz Inacio Lula da Silva took office amid concern his administration could default on the country’s debt.
Brazil’s economy, Latin America’s largest, may shrink in the fourth quarter, HSBC Global Asset Management said today. Negative growth this quarter would be the first contraction since the second quarter 2006.
Folha Online, the Web service of Brazil’s largest newspaper, yesterday reported — without saying how it obtained the information — that Lula may limit the central bank’s autonomy should policy makers fail to trim the benchmark interest rate this week or at least signal cuts for next year.
“I never heard or saw President Lula meddle with the central bank’s independence. He always behaves with profound respect toward the central bank’s autonomy,” Belluzzo said.
The yield on the interest rate future contract for January 2010 delivery traded on Sao Paulo’s commodities and futures exchange dropped 14 basis points to 13.18 percent, at 2:35 p.m. New York time, and earlier fell to 13.05 percent, the lowest since April 9.
The real fell 3.4 percent to 2.5160 per dollar at 2:35 p.m. New York time from 2.4335 late Dec. 5.
Source: Bloomberg
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