September 12, 2011 / 7:10 PM / 8 years ago

WRAPUP 1-Brazil, Chile seen cutting rates on global woes

 * Darkening economic outlook prompts rate cut bets
 * Brazil rate seen cut by 1 percentage point by year-end
 * Chile poll sees 25 bps cut to 5.0 pct by February
 By Alexandra Ulmer and Vanessa Stelzer
 SANTIAGO/SAO PAULO, Sept 12 (Reuters) - Brazil and Chile
are seen cutting rates in the next months in a reversal of
monetary policies in place for much of the last year and a
half, polls of analysts showed on Monday.
 Rising Brazilian inflation is a worry for markets but
Europe's debt crisis and the risk of a recession in the United
States are likely to weigh more on policymakers in Brazil and
Chile, according to the central bank polls.
 Latin America's aggressive interest rate hikes were already
seen as largely over, with central banks in Peru, Chile and
Colombia pausing tightening cycles recently. Fellow emerging
market India is also thought to be at the end of its own
18-month cycle.
 Brazil, which has some of the world's highest interest
rates and is grappling with price pressures, unexpectedly
blazed the trail when it cut its Selic rate 50 basis points to
12 percent at the close of last month. And markets bet more
cuts will follow. For more see [ID:nS1E78B069].
 Analysts in a weekly central bank survey saw Brazil's Selic
lending rate at 11 percent at the end of this year -- down from
a forecast of 12.38 percent the previous week. The sharp drop
was reflected in forecasts for next year -- also 11 percent,
down from last week's view of 11.88 percent. [ID:nS1E78B069]
 Brazilian President Dilma Rousseff has said repeatedly she
wants borrowing costs to fall closer in line with those of
global peers like India and China.
 Chile's central bank is now seen cutting its own key rate
by 25 basis points to 5.0 percent by February on a darkening
economic outlook, a bank poll of analysts showed on Monday.
They now see 5.25 percent by year-end, down from their August
forecast of 5.5 percent. [ID:nS1E78B0BD]
 "The region has to lower their interest rates to give the
local economies a fresh boost," said Matias Madrid, chief
economist with Banco Penta in Santiago. "But I don't think the
cuts will be very aggressive."
Factbox on global interest rates                  [ID:nGLOBAL]
Factbox on Latin American rates                [ID:nN1E76S1S9]
Graphic on Americas economies
 Brazil's currency, the real BRBY, plunged to its lowest
levels in more than nine months on Monday on concern world
growth will slow and Brazilian inflation will rise.
 Brazil's annual IPCA consumer price index is seen at 6.45
percent at year-end from a previous forecast of 6.38 percent,
closer to the government's target ceiling of 6.5 percent for
the year.
 But inflation is seen easing in Chile, with analysts in the
central bank's monthly poll forecasting a 3.3 percent rate in
the 12 months to December, close to the central bank's 3.0
percent target and below their previous view of 3.6 percent.
 Commodity prices, a source of inflation pressures in the
region's export-driven economies and closely watched by central
banks, fell sharply in early August before rising.
 Emerging markets, many of which boast robust economic
growth and solid fiscal fundamentals, have been hit by capital
inflows from foreign investors that have triggered an
export-damaging currency rally.
 And policy makers from Brazil to India to China are
battling strong price pressures. [ID:nI8E7K500H]
 China's central bank said on Monday that inflation, which
fell in August from a three-year high, is still too high and it
would maintain its monetary policy settings despite heated
debate among economists about a possible relaxation.
 (Editing by Simon Gardner and Andrew Hay)

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