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(Adds quotes from Moody's analyst, background)
By Walter Brandimarte
SAO PAULO, June 3 (Reuters) - Moody's Investors Service expects to decide whether to downgrade Brazil's credit rating only after its analysts meet with the country's policymakers in the third quarter, said senior analyst Mauro Leos at the rating agency on Wednesday.
The agency assigned a negative outlook to Brazil's Baa2 credit rating last September, warning it could downgrade it over the next 12-18 months if economic growth remained low or if a new government that was about to be elected did not tighten fiscal policy.
"We're planning a visit to the country sometime during the third quarter," Leos said in a phone interview. "After that, I think we'll have elements to discuss what to do, if anything, with the rating."
While President Dilma Rousseff launched an aggressive austerity plan after being re-elected, the Brazilian economy is expected to contract at least 1 percent in 2015, causing revenues to fall and making it tougher for the government to meet its fiscal targets.
Brazil's negative debt trajectory should persist for a while, with the country's debt peaking at about 66 percent of gross domestic product in 2016, Moody's estimated.
"At that level, Brazil's government debt burden is higher than the median for Baa-rated sovereigns," Leos warned in a report published earlier on Wednesday.
Brazil's rising interest rates, which are expected to hit 13.75 percent later on Wednesday as part of a central bank campaign to rein in inflation, also pose a "major burden" for the economy and the sovereign rating, Leos said.
"The higher the interest rates, that means that the effort in terms of primary surplus also has to be higher to compensate for that," Leos said.
Despite a possible rating downgrade, Brazil's coveted investment grade is safe for now, Leos said.
"At this point in time there are enough elements to support the investment grade," he argued. "For the time being, the discussion has to do with where to place (Brazil) in the Baa space."
At Baa2, Brazil's rating stands two notches above speculative territory. (Editing by Richard Chang and Diane Craft)