Brazilian swap rates fell, erasing earlier gains, after President Dilma Rousseff said the government will continue to remove obstacles to economic growth.
Swap rates on contracts due in January 2014 fell two basis points, or 0.02 percentage point, to 7.67 percent at 5:14 p.m. in Sao Paulo, extending their weekly drop to 15 basis points. The rates touched a record low 7.61 percent yesterday. The real was little changed at 2.0376 per dollar and has declined 0.4 percent this week.
Brazil’s government will try to offer concessions to private companies and is working to remove obstacles to growth, including by lowering taxes, President Dilma Rousseff said at an event in Bahia state today.
“In the afternoon swap rates fell again with Dilma affirming that she wants to remove obstacles to growth, a sign lower rates are here to stay,” said Luciano Rostagno, the chief strategist at Banco WestLB do Brasil SA, in a phone interview from Sao Paulo. “Investors are also betting that next week’s central bank minutes will be dovish and that the current pace of cuts of 50 basis points will continue.”
Brazil’s swap rates were headed for a seventh straight weekly decrease on speculation policy makers will sustain the pace of reductions in borrowing costs at their August meeting as the economy slows.
Central bank board members voted unanimously on July 11 to lower the target lending rate by a half-percentage point to a record low 8 percent, an eighth-straight reduction, saying economic “fragility” abroad is leading to slower inflation. The central bank has lowered the benchmark by 4.5 percentage points since August, the most among the Group of 20 nations.
Central bankers led by President Alexandre Tombini have lowered rates 4.5 percentage points since August.
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