Dec. 15 (Bloomberg) -- Brazil’s central bank may cut its benchmark interest rate in January, earlier than previously forecast, to “cushion” Latin America’s largest economy from the global credit crisis, Morgan Stanley said.

The central bank may reduce interest rates by 50 basis points at each of its next four meetings, Morgan Stanley said in a report today. Previously it expected a total of 100 basis points cut by the end of 2009, beginning in the third quarter.

Last week, Brazil’s central bank decided to keep the benchmark rate at 13.75 percent, a two-year high, after discussing “the possibility of lowering” it as growth slows.

“Recent dovish signs in the wake of Brazil’s December monetary policy meeting lead us to revise our rate forecast,” Marcelo Carvalho, Morgan Stanley’s chief economist for Brazil, wrote in the report. “The policy easing seems unlikely to avoid recession, given powerful global headwinds.”

Brazil is at the start of a technical recession, which is two consecutive quarters of a contracting economy, and could see no economic growth next year, Morgan Stanley said.

To contact the reporter on this story: Joshua Goodman in Rio de Janeiro at jgoodman19@bloomberg.net; Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net

Last Updated: December 15, 2008 11:32 EST