By Joshua Goodman and Andre Soliani
April 30 (Bloomberg) -- Brazil’s central bank slowed the pace of monetary easing last night even as it cut the benchmark interest rate to a record low, indicating policy makers need time to evaluate tentative signs of an economic recovery.
The directors, led by bank President Henrique Meirelles, lowered the so-called Selic rate to a record 10.25 percent from 11.25 percent, as expected by 41 of 57 economists in a Bloomberg survey. The move follows a cut of 150 basis points at the meeting last month. A basis point equals 0.01 percentage point.
Brazil may be recovering from its deepest quarterly contraction on record. After slashing a record 655,000 jobs in December, companies rehired 35,000 workers last month. Car sales climbed 17 percent in March from a year earlier and bank lending also rebounded after falling in February for the first time in five years.
“Policy makers are signaling that the risk of a longer contraction has lessened,” said Roberto Padovani, senior strategist at Banco WestLB AG in Sao Paulo, adding that the directors gave no hint of their next move in an unusually terse, one-sentence statement. “But they want to keep their options open and not close any doors.”
Even with “faint” signs of recovery, Padovani expects Brazil to end the year with negative growth for the first time since 1992, with gross domestic product contracting 0.2 percent.
Lula’s View
President Luiz Inacio Lula da Silva has been more upbeat, saying on April 27 that Latin America’s largest economy is responding to government stimulus measures and showing signs of “improvement.”
As part of his stimulus plan, Lula has cut taxes on car sales, construction materials and home appliances, injected about $90 billion in currency and money markets and pledged to carry out planned public works even as tax revenue erodes.
The government also cut its primary budget surplus target for 2009 to 2.5 percent of gross domestic product from 3.8 percent to avoid scaling back public spending.
“The fiscal stimulus also reduces the need for more aggressive cuts,” Andre Loes, chief economist at HSBC Bank in Sao Paulo, said in a telephone interview.
Record job losses and a plunge in output threaten the government’s 2 percent growth target, a goal already cut from 4 percent at the start of the year. Brazil’s economy will shrink 4.5 percent in 2009, according to Morgan Stanley.
Shrinking Economy
Brazil’s economy shrank 3.6 percent in the last quarter of 2008 from the previous three months, the deepest contraction since the series started in 1996.
Slower inflation will allow policy makers to keep cutting the Selic rate at their June meeting, economists say. The benchmark interest rate will drop to 9.25 percent by year-end, according to the median estimate in an April 24 central bank survey of about 100 economists.
Brazil’s broadest measure of inflation, the so-called IGP-M price index, fell 0.15 percent this month, the Getulio Vargas Foundation said yesterday. The index, which measures consumer, construction and wholesale prices, has dropped in three of the first four months of 2009.
Brazil’s annual inflation rate, as measured by the benchmark IPCA-15 index, fell to 5.4 percent in mid-April, an 11-month low. Economists expect inflation to slow to 4.3 percent by year-end, according to the central bank survey.
The bank targets inflation of 4.5 percent, with a leeway of plus or minus two percentage points.
quinta-feira, 30 de abril de 2009
Meirelles Slows Pace of Brazil Rate Cuts on Signs Crisis Easing
Publicado por Agência de Notícias às 30.4.09
Marcadores: Internacionais sobre o Brasil
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