UPDATE 2-Brazil analysts see no rate rises through 2010

* Analysts cut 2010 inflation, Selic rate forecasts

* Brazil Selic rate seen stable through end of 2010

(Recasts, adds comments)

SAO PAULO, Aug 23 (BestGrowthStock) – Economists see Brazil’s
central bank holding interest rates through year-end, cementing
market expectations policymakers will next week halt a cycle of
interest rate hikes that began in April.

Local economists cut their forecast for the benchmark Selic
rate to 10.75 for 2010, down from 11 percent last week, in a
weekly central bank survey.

The central bank last month raised the Selic rate to 10.75
percent from 10.25 percent, surprising economists who had seen
an increase of 75 basis points.

The change in outlook from economists accompanies cuts in
their inflation forecasts for this year and signs of an
increasingly dovish stance from the bank.

Last week 12-month inflation fell below the center of the
government’s target for the first time since January. The
central bank has this year emphasized its intentions to bring
the annual inflation rate to 4.5 percent, although the target
includes a band of plus or minus 2 percentage points.

The slower inflation reinforces a call that the central
bank “will announce the end of the tightening cycle,
standing pat at the September 1 meeting,” JP Morgan analysts
wrote in a report.

Brazilian interest rates remain among the world’s highest,
compared to near-zero levels in several developed economies,
due in part to the country’s rapid economic recovery.

Economists forecast the IPCA inflation index at 5.10
percent for 2010, compared with 5.19 percent the previous week,
the bank said on Monday.

Inflation has slowed recently after a spike earlier this
year.

But at least some of that slowdown comes from seasonal
factors that are hard to broaden into wider trends, and not the
result of policy choices. The rough weather that pressured food
prices earlier this year has eased, and clothing prices are
falling now as stores try to move the last of the season’s line
as they bring in new styles.

Minutes from last month’s central bank meeting reinforced
dovish signals. Policymakers said the Brazilian economy was
moving to a pattern of slower growth with reduced inflation
risks.

The bank has now raised the Selic by a total of 2
percentage points this year from 8.75 percent, starting in
April.

But next year — when a new administration will take power
after October elections, making forecasts cloudier —
economists see the central bank tightening again. Economists in
the survey forecast the Selic at 11.5 percent at the end of
2011, unchanged from the previous week.

The economists raised their forecast for 2011 inflation for
the first time in 19 weeks, to 4.86 percent from 4.8 percent.

“The upward revision in 2011 inflation forecasts looks
particularly relevant as it comes in a context where near-term
expectations have actually drifted lower,” noted Marcelo
Carvalho of BNP Paribas in a note to clients.

Yields on Brazilian interest rate futures contracts
(0#DIJ:: ) broadly slipped in afternoon trading on Monday, as
investors pared bets for rate increases in coming months.
(Reporting by Elzio Barreto; Additional reporting by Luciana
Lopez; Editing by Andrew Hay)

UPDATE 2-Brazil analysts see no rate rises through 2010