Thursday, February 25, 2010

Brazil May Raise Rates in March on Stimulus Removal

Feb. 25 (Bloomberg) -- Brazil’s central bank probably will raise interest rates next month for the first time since September 2008 after accelerating economic growth allowed it to withdraw stimulus measures, Goldman Sachs Group Inc. and Itau Unibanco Holding SA said.

The decision yesterday requiring banks to deposit an additional 71 billion reais ($39 billion) with the central bank is pushing forward expectations for the start of the tightening cycle, Guilherme Figueiredo, who helps manage $1.2 billion at M. Safra & Co. in Sao Paulo, said in an interview.

“The change in the reserve requirement was very big and means the central bank is very worried about the heat in the economy,” said Figueiredo, who forecasts an increase in the benchmark Selic interest rate in March.

Yields on interest rate future contracts due January 2011, the most traded on Sao Paulo’s BM&F exchange, rose as much as 0.06 percentage point today to 10.44 percent, before retreating to 10.41 percent at 9:52 a.m. New York time. Traders bet policy makers will raise rates by at least a quarter point next month, according to Bloomberg estimates based on the rate futures. the real fell 0.7 percent to 1.8370 per U.S. dollar.

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