MercoPress. South Atlantic News Agency

Brazil’s February industrial production expands at fastest pace in eleven months

An increase in the Central bank’s basic rate Selic is expected later this month

Brazil’s industrial production rose at the fastest pace in 11 months in February. Output rose 1.9% from January and 6.9% from the same month a year earlier, the national statistics agency said.

The faster-than-expected expansion runs counter to government efforts to cool the economy and the central bank’s view that this was effectively happening.

The central bank cut its forecast for 2011 economic growth to 4% from 4.5% in its quarterly inflation report published March 30. Economists covering the Brazilian economy cut their 2011 growth forecast to 4% in a central bank survey published March 28, down from 4.6% at the start of February.

The yield the interest-rate future contract due January 2012, the most traded in Sao Paulo raised five basis points, or 0.05 percentage points to 12.16% while the real rose 0.4% to 1.6257 per US dollar.

Data published March 16 show Brazil’s economy may be cooling more slowly than analysts had expected. Brazil’s economic activity index rose at its fastest pace in nine months in January.

Brazil’s economy grew 7.5%, the fastest expansion since 1986. Policy makers have raised borrowing costs twice this year, pushing the Selic rate to 11.75% from 10.75% in December, to prevent the economy from overheating.

Traders are speculating that the central bank will raise borrowing costs by 25 basis points, or 0.25 percentage point, to 12% at its April 19-20 policy meeting, interest-rate futures contracts show.