UPDATE 3-Banks bet on Brazil rate cuts despite cenbank minutes
* Barclays, Citi, Santander, Itau BBA see rate cuts in 2013 * Central bank minutes little changed from prior meeting * Bank reiterates "stability of monetary conditions" * Economic recovery seen more intense in 2013 - Copom By Silvio Cascione SAO PAULO, Dec 6 (Reuters) - Several banks on Thursday bet that Brazil would see even lower interest rates, even as the central bank reiterated its willingness to leave them unchanged for a long time. In the minutes of its last policy meeting, when it left the its Selic benchmark interest rate unchanged at a record low of 7.25 percent, the bank repeated that stability will be the best strategy going forward. The decision was taken before the government reported on Friday very disappointing economic growth of 0.6 percent in the third quarter - just half the pace expected by financial markets. The bank did not make reference to the meager economic performance in the minutes. Still, the document was followed by a wave of forecast revisions. Analysts at Barclays and Itaú BBA cut their end-2013 Selic forecasts to a new low of 6.25 percent, while Citigroup trimmed its estimate to 6.5 percent. On Wednesday, Banco Santander Brasil had cut its forecast to 6.25 percent too. "Even acknowledging that Copom is currently signaling the intent to keep Selic on hold for a while, our take is that they will eventually change their activity outlook as soon as fourth-quarter GDP proves to show another weak (below potential pace) performance," wrote Citi's analysts Marcelo Kfoury and Leonardo Porto in a research note. Before last week's decision to keep the Selic rate unchanged, the central bank had cut it ten times in a row to help President Dilma Rousseff boost a flagging economy. The rate cuts came to an end as the inflation outlook for 2013 started to become a concern. "If in between the end of this year and the first quarter of the next one we start to forecast economic growth below 3 percent in 2013, then the conditions for further rate cuts would be in place," said Carlos Kawall, chief economist at J. Safra Corretora and a former government official. "I'm not expecting cuts now, but the risks of a cut are higher than for a rise." Yields on interest rate future contracts in Brazil fell, suggesting that traders also believe the bank could cut rates again in 2013. It won't become clear how many other banks are following suit and lowering their interest rate forecasts until Monday, when the central bank releases its weekly poll of economists. At its Nov. 28 meeting, the bank's Monetary Policy Committee, known as Copom, also reiterated its expectations that economic activity will pick up next year, when the lagging effects of the interest rate cuts will boost domestic demand. There was little change from the previous meeting's minutes. The committee led by central bank President Alexandre Tombini , however, did remove a reference, present in the prior minutes, to "rising" business and consumer confidence. Although it did retain the language that indicated both business and consumer optimism remained elevated. The committee also inserted a reference to "moderating prices" of some "real and financial assets," without elaborating. "One possible interpretation here is an additional focus on the currency. In our opinion, it signals that a weaker real would add noise to the monetary policy management moving forward," wrote David Beker, chief Brazil economist and fixed income strategist at Bank of America Merrill Lynch. The bank said the fulfillment of the inflation target next year assumes the government meeting its debt-reduction targets - in the form of the so-called primary budget surplus. Most analysts in a recent Reuters poll said such a scenario is unlikely. Brazil's central bank targets inflation at 4.5 percent, with a leeway of plus or minus 2 percentage points. Economists have said policymakers are tolerating it to remain above the center of the target though, between 5 and 6 percent, as they try to stimulate economic growth.