LATAM WEEKAHEAD-Brazil industrial output key for rates decision

Sun Mar 1, 2009 1:00pm EST
By Walter Brandimarte
NEW YORK, March 1 (Reuters) - Brazil's industrial production data is expected to take another plunge this week in a report that will be crucial for policymakers in Latin America's largest economy pondering the pace of monetary easing.
Friday's release of Brazil's industrial output data for January will be a key issue for Latin American markets during the week, as investors gauge the impact of the global credit crisis in the region.
December's data showed output diving a record 12.4 percent from the previous month and 14.5 percent on a year-on-year basis. The reading was far worse than economists expected, causing Brazil's interest rate futures to fall across the curve early in February, in anticipation of more aggressive monetary policy easing.
"While a negative year-on-year print is also anticipated in January, how bad it comes could be critical to shaping expectations for the next central bank meeting, on March 11," RBC Capital Markets analysts wrote in a research note.
"Consensus is still for a 100 basis points rate cut, but risks of more aggressive ease are very high," they added.
Brazil's benchmark Selic interest rate stands at 12.75 percent, after a 100 basis points cut on Jan. 21, the first of an expected cycle of monetary policy easing in the country.