Brazil has room to test lower interest rates

Brazil has "a window of opportunity" to test lower interest rates this year, given the deflationary forces currently at play in the global economy, the president of the country's state development bank said on Monday. "There is no reason in Brazil not to test lower interest rates and that's what the central bank is doing carefully," BNDES President Luciano Coutinho told investors in New York.
Brazil's central bank last week lowered its base Selic interest rate to 9 percent, near an all-time low, and surprised markets by signalling more cuts were possible.
Analysts forecast Brazil's inflation to stand at 5 percent this year and 5.5 percent in 2013, above the government target of 4.5 percent. But Coutinho is more upbeat.
"Brazil's growth will be higher than markets expect, and inflation will be lower than markets expect this year," he said at a conference organised by the Brazilian American Chamber of Commerce.
A deceleration in the world economy, particularly in China, which translates in lower commodities prices, will contribute to lower global inflation this year, Coutinho said.