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Experts Expecting Lower Interest Rates in Brazil

According to the average expectation of market analysts, Brazil’s official annualized benchmark interest rate (Selic), which currently stands at 16.50%, should decline to 14.25% by December. Every Friday they respond to a Central Bank poll about trends in the main economic indicators.

Four weeks ago the economists forecast that interest rates would fall to 14.50%, but, in view of three consecutive decisions by the Monetary Policy Committee (COPOM) to lower the rate by 0.75 percentage points, their optimism has been whetted for a bigger decrease. Already last week their forecast had dropped to 14.38%.

The results of the survey published Monday, March 27, in the Focus Bulletin show that the analysts continue to expect that the US dollar will be worth 2.20 reais at the end of this year. Their prediction for the exchange rate at the end of 2007 is 2.38 reais, down from the 2.40 reais that appeared in last week’s survey.

As far as the economists see it, the market continues to maintain its course, without important variations. Except for a slight improvement in their forecast for the growth in industrial production, up from 4.11% to 4.21%.

Even so, this has not altered their estimate of this year’s growth in the Gross Domestic Product (GDP), the total wealth produced in the country, which has remained at 3.50% for 47 weeks. For next year, however, they lowered their estimate from 3.70% to 3.65%.

All the other indices for this year remain the same. The trade balance (exports minus imports) should end the year at around US$ 40 billion, and the current account balance, which includes all foreign commercial and financial transactions, should end up at US$ 9 billion. The inflow of foreign direct investments should total US$ 15 billion.

Agência Brasil

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