Oct. 27 (Bloomberg) -- Brazil's central bank may halt six months of interest-rate increases as the credit crunch slows economic growth, overriding concern that inflation will quicken because of a weakening currency.

Policy makers led by bank President Henrique Meirelles will keep the benchmark interest rate at 13.75 percent at an Oct. 28- 29 meeting, according to 14 of 25 economists in a Bloomberg survey. The others expect the central bank to raise rates for a fifth straight time since April.

Brazil's fastest economic expansion in more than a decade may end as commodity prices, the local currency and stocks plunge. JPMorgan Chase & Co and Banco BNP Paribas Brasil SA cut their growth forecast for Latin America's biggest economy to less than 3 percent in 2009, which would be the slowest since 2003.

``The best choice at this point is to stop, wait and see what will happen,'' said Tomas Malaga, chief economist for Banco Itau Holding Financeira SA in Sao Paulo. ``Pressures coming from abroad prevail at this point and may open room for rate cuts'' in the future.

The Brazilian real has lost 29 percent of its value against the dollar in the past two months, the second-worst performance among the 16 most-traded currencies after the South African rand.

The currency's drop is hurting some companies. Pulp maker Aracruz Celulose SA and poultry company Sadia SA are delaying investments after losing at least a combined 2.86 billion reais ($1.3 billion) on bets the Brazilian real would extend a four- year rally. Grupo Votorantim said on Oct. 10 it spent 2.2 billion reais to cancel unprofitable currency derivatives.

`Contradictory Pressures'

Still, some economists such as Marcelo Carvalho at Morgan Stanley, expect the central bank to raise interest rates to keep inflation in check as the real tumbles against the U.S. dollar.

``The central bank has to deal with contradictory pressures -- while lower commodity prices and slower growth because of the credit squeeze help contain inflation -- the currency fuels inflation,'' Carvalho said. ``This situation makes the bank's life harder.''

Brazilian prices, as measured by the IGP-10 index of wholesale, consumer and construction costs, rose 0.78 percent in the month ended Oct. 10 after declining 0.42 percent the previous month.

Carvalho expects policy makers to raise the so-called Selic rate to 14.25 percent, before ending the tightening cycle in December.

The central bank may raise the Selic to 14 percent this week, an Oct. 24 central bank weekly survey of economists published today showed. The estimate compares with last week's forecast for a half-point increase to 14.25 percent.

Markets

Last week, the real fell 8.2 percent to 2.3075 to the dollar even after the central bank pledged to pump the equivalent of $50 billion in currency markets.

The yield on the government's zero-coupon bond due January 2010 rose 1.03 percentage points to 15.82 percent.

The benchmark Bovespa stock index fell 22 percent to 31481.55. ALL America Latina Logistica SA, Latin America's biggest railroad operator, was the biggest loser, with a 40 percent decline. JBS SA, the world's largest beef producer, was the biggest gainer with a 7.1 percent increase.

The following is the list of events in Brazil this week:

Event                                   Date
Weekly Trade                            10/27
Rate Decision                           10/29
IGP-M Price Index                       10/30
Budget Balance                          10/30

To contact the reporter on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net; Telma Marotto in Sao Paulo at tmarotto1@bloomberg.net

Last Updated: October 27, 2008 08:04 EDT