Brazil, Colombia Seen Cutting Rates

Credit Suisse expects Colombia’s central bank to cut interest rates by at least 25bp on January 30 as market expectations for inflation in 2009 have improved. But it says that if indicators released over the next two weeks point to sharp deceleration of activity in late Q4, the central bank may cut its reference interest rate by 50bp. The median expectation for end-2009 headline inflation among Colombian and foreign analysts, says the shop, declined to 5.20% from 5.42%. UBS Pactual meanwhile expects Brazil, whose central bank meets next week, to cut its Selic rate by 50bps, although a 75bp cut is also possible. Barclays expects Brazil to cut by 75bp as it believes the economy will continue contracting and GDP growth will fall below 1% in 2009, down from its previous forecast of 1.9%.