MercoPress. South Atlantic News Agency

JP Morgan Chase forecast slower growth and lower interest rates in Brazil

The benchmark Selic rate is anticipated to drop to 10.5% next January

JPMorgan Chase & Co. cut its forecast for Brazil’s economic growth and said it expects the central bank to cut interest rates more than it previously expected as global financial turmoil weighs on confidence in Latin America’s biggest economy.

The bank, in an e-mailed report, said it expects policy makers to reduce the benchmark interest rate to 10.5% by January from its current 12%. Previously the bank expected the so-called Selic rate to fall to 11% in January.

Latin America’s biggest economy should grow 2.3% in the second half of the year, less than a 3.1% forecast made Aug. 8, JPMorgan analysts wrote in the report. The Brazilian economy next year should expand 3.4% instead of a previous 3.8% forecast.

“Domestic growth prospects for next year still seems cushioned by a more preemptive monetary policy response and the buffers from fiscal and quasi fiscal policies” JPMorgan analysts including Fabio Akira wrote in the report released this week.

The currency will end the year at 1.80 per U.S. dollar, compared with the previous forecast of 1.70, JPMorgan said.