Yields on most Brazilian interest-rate futures contracts fell as traders bet the central bank will step up rate cuts after inflation slowed more than analysts forecast and factories cut capacity usage.
Yields on the futures contract due in January 2013 declined four basis points, or 0.04 percentage point, to 10.12 percent today. The real gained 0.9 percent to 1.7326 per dollar, from 1.7477 yesterday.
Brazil’s wholesale and consumer prices increased 0.4 percent in October after climbing 0.75 percent in September, the Getulio Vargas Foundation said today. The increase was less than the 0.42 percent median forecast of 32 economists surveyed by Bloomberg. Brazil’s manufacturers cut use of installed capacity to 81.6 percent in September from 82.2 the month before, a national industrial group said.
“The data show the economy growing below its potential, which can reduce inflation a bit,” Vladimir Caramaschi, chief economist of Credit Agricole’s Brazilian unit, said in a telephone interview from Sao Paulo. “This could make the central bank cut rates more than is expected.”
Yields on interest-rate futures contracts indicate traders are betting the central bank will lower the benchmark Selic rate by as much as 150 basis points by April, up from an 125 basis points estimated last week.
Economists reduced their 2011 growth forecast for a fifth straight week, a central bank survey showed yesterday. Latin America’s biggest economy will expand 3.2 percent this year, down from a forecast of 3.29 percent the previous week, the survey showed. Analysts held their 2012 growth estimate at 3.5 percent.
The central bank has lowered its key Selic rate twice since August, bringing it down 100 basis points to 11.5 percent in an effort to protect Brazil from the global slowdown without stoking inflation. Central bank President Alexandre Tombini said Oct. 31 that “moderate” rate reductions are consistent with the goal of bringing annual inflation down to the government’s 4.5 percent target by 2012.