Weaker Real
Brazil’s currency has been weaker than 1.90 since April 30 as central bank interventions to aid manufacturers and reductions in borrowing costs coincided with fiscal and political instability in Europe.
Policy makers will cut the Selic, as the target lending rate is known, to 8 percent by the end of 2012, down from the previous forecast of 8.5 percent, according to the median estimate in a May 11 central bank survey of about 100 economists published today.
“The worsening outlook abroad and weak economic activity in Brazil reinforce the trend for the Selic to fall,” Newton Rosa, the chief-economist at SulAmerica Investimentos, said by phone from Sao Paulo. “The drop in commodity prices helps control food prices a bit and neutralizes the impact of the currency on inflation.”