Some in Brazil gov't see room to end rate hiking cycle -sources

martes 2 de junio de 2015 16:19 GYT

By Alonso Soto and Luciana Otoni

BRASILIA, June 2 (Reuters) - Some members of President Dilma Rousseff's economic team believe a brighter inflation outlook should lead Brazil's central bank to slow the pace of interest rate hikes or even halt them altogether at its July meeting, two officials told Reuters.

Brazil's central bank is widely expected to raise interest rates by 50 basis points at its next meeting on Wednesday for the fifth straight time to 13.75 percent, lifting borrowing costs to a six-year high and well above those in other major economies.

Although the aggressive pace of rate hikes that started in October is a key part of the government's strategy to regain investors' confidence, some members of Rousseff's economic team outside the central bank are worried more tightening could deepen what is expected to be the worst recession in 25 years.

"We have put the house in order so we don't believe there is a need for the central bank to be so tough," said an official close to the economic team who asked for anonymity to speak freely. "Indicators show that monetary policy is working."

Another senior official outside the central bank said he expects policymakers to soon end the tightening cycle, which lifted rates by 225 basis points in six months. A continued decline in long-term inflation expectations should convince policymakers it is time to stop, the source said.

After Wednesday's policy meeting, the central bank's next one is scheduled for July 29.

A central bank spokesman declined to comment.

Rousseff and her economic team have been under fire from lawmakers and some business leaders for tightening fiscal and monetary policies at a time when the economy is shrinking.   Continuación...