Brazil May Cut Rate 1 Percentage Point in March, Analysts Say

By Paulo Winterstein
Feb. 3 (Bloomberg) -- Brazil’s central bank likely will cut the benchmark interest rate by a full percentage point at its next meeting after the biggest drop in industrial production in 17 years, analysts said.
Bulltick Capital Markets, Barclays Plc and RBC Capital Markets predicted policy makers will lower the so-called Selic rate to 11.75 percent from the current 12.75 percent, according to notes published today. The central bank cut the rate by a full percentage point on Jan. 21, the most in five years.
“The very weak December industrial production figure reinforces the scenario of another 100 basis points cut in the Selic rate in the March 10/11th COPOM meeting,” Sergio Goldman, Bulltick’s head of research in Sao Paulo, wrote in a note.
Total goods produced by factories fell 14.5 percent in December from the same month a year earlier, the second consecutive contraction, the national statistics agency said today. The decline was greater than the median forecast of a 10.3 percent drop in a Bloomberg survey of 22 economists.
The Selic rate likely will decline to 10.25 percent at “mid-year,” with “risks clearly tilted towards even lower rates,” Barclays economist Paulo Mateus wrote.
The central bank also may will reduce rates another full percentage point in the second quarter after 1-point cut in March, RBC Capital’s head of research Nick Chamie wrote.