(Updates with yields and currency in fourth paragraph.)
Sept. 14 (Bloomberg) -- Brazil’s economy expanded at its fastest pace in six months in July, even as the central bank bets on slower growth to curb the fastest inflation in six years.
Economic activity, a proxy for gross domestic product, rose 0.46 percent in July from the previous month, according to the central bank’s seasonally adjusted index, after contracting a revised 0.25 percent in June. The increase was in line with the 0.50 percent median forecast in a Bloomberg survey of 11 analysts.
Central bank President Alexandre Tombini cut the benchmark interest rate a half point to 12 percent on Aug. 31, after raising it at the previous five policy meetings, citing a “substantial deterioration” in the global economy. Traders are betting the central bank will cut the rate to 11 percent by the end of the year, according to Bloomberg estimates based on interest rate futures.
The yield on the interest rate futures contract maturing in January 2013, the most traded in Sao Paulo today, fell five basis points to 10.68 percent at 11:41 a.m. New York time. The real weakened 1.2 percent to 1.7308 per dollar.
Activity was up 1.66 percent from the same month a year ago, according to the non-seasonally adjusted series.
President Dilma Rousseff today said that she hopes Latin America’s biggest economy will grow “a little more” than 4 percent this year, more than analysts are forecasting.
“We’re going to make an effort for growth to reach 4 percent and a little more,” she told reporters in Brasilia. “We’re counting on a resurgence in the last quarter.”
Economists lowered the growth forecast in the latest central bank survey. They now expect growth to slow to 3.56 percent this year, down from a forecast of 4 percent at the start of June. Last year the economy expanded 7.5 percent, its fastest pace in more than two decades.
Brazil’s growth rate will lag that of Russia, India and China, the other so-called BRIC countries, between 2011 and 2014, according to forecasts from the International Monetary Fund.
Consumer prices rose 7.23 percent in the year through August, exceeding the 6.5 percent upper limit of the central bank’s target range for a fifth straight month. The bank targets inflation of 4.5 percent, plus or minus two percentage points.
--With assistance from Kristy Scheuble in Washington D.C. Editors: Harry Maurer, Harry Maurer
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