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Brazil Analysts Cut 2013 Year-End Selic Call for Third Week

Nov. 12 (Bloomberg) -- Analysts covering Brazil lowered their forecast for the benchmark rate at year-end 2013 for the third straight week, as the economy struggles to gain speed in response to government stimulus measures.

Brazil’s Selic rate will be 7.25 percent at the end of next year, according to the median estimate in a central bank survey of about 100 analysts published today. Analysts had forecast a 2013 Selic of 7.63 percent the previous week. This week marks the first time economists have predicted the central bank will hold the rate steady for all of next year.

“It’s a big move,” Daniel Snowden, emerging markets analyst at Informa Global Markets, said in a telephone interview from London. “The central bank’s reiteration during the past couple of weeks that it will be keeping rates low for an extended period is starting to sink into the market. The bank is still is very much focused on growth.”

President Dilma Rousseff’s administration has broadened measures aimed at helping consumers and companies in the world’s second-largest market. Since August 2011, the central bank has reduced the Selic rate more than any other G-20 nation to a record low 7.25 percent. Policy makers have also increased public spending, implemented tax cuts worth 45 billion reais ($22 billion) and pressured banks to lower lending rates to spur consumer demand. Central bank President Alexandre Tombini on Nov. 7 reiterated plans to keep rates unchanged for a “prolonged time.”

Economists in the survey maintained their forecast for gross domestic product growth this year and next at 1.54 percent and 4 percent, respectively.

Industrial Output

Some sectors of the economy have been slow to respond to the stimulus measures. Brazil’s industrial production in September fell for the first time in 4 months, as companies reduced machine and equipment investments. Consumer default rates in September remained at the highest level since November 2009 despite near record-low rates on bank loans.

Still, vehicle sales jumped 18.6% in October over the month prior, as consumers took advantage of tax reductions, car dealership association Anfavea said last week. President Rousseff’s economic team forecasts that the economy expanded the fastest in more than two years in the third quarter, at a 5 percent to 6 percent annualized pace, a government official said on Oct. 23.

Inflation rose in October at the fastest yearly pace since February on food supply shocks. Keeping the Selic rate unchanged is the best strategy to ensure inflation will slow to target next year, Tombini said in an interview on Nov. 7. The bank targets inflation of 4.5 percent, plus or minus two percentage points. Economists in the survey predicted inflation of 5.46 percent this year, up from the previous week’s estimate of 5.44 percent.

“Our projections are still valid: the convergence of inflation to the mid-point of the target in the third quarter of next year with this monetary policy strategy,” Tombini said.

To contact the reporter on this story: Matthew Malinowski in Brasilia at

To contact the editor responsible for this story: Joshua Goodman at

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