Brazil First Quarter GDP Climbed 1.3% From Previous Quarter

Brazil’s economy
expanded 1.3 percent in the first quarter from the previous three-month
period, the national statistics agency said.

Gross domestic product rose 4.2 percent from a year earlier, the
national statistics agency said today in Rio de Janeiro. Both figures
matched the median forecasts of economists in a Bloomberg survey. Growth
in the fourth quarter of 2010 from the previous three months was
revised to 0.8 percent from 0.7 percent.

President Dilma Rousseff’s government aims to cool growth and curb
inflation in Latin America’s largest economy by increasing borrowing
costs, reducing spending and curbing credit expansion. The measures will
slow growth to 4 percent this year from 7.5 percent in 2010, the
fastest pace in more than two decades, according to a central bank
survey of economists published May 30.

The expansion, fueled by increased lending, record low unemployment
and higher commodities prices, has already shown signs of slowing.
Industrial production slumped 2.1 percent in April from March, the
biggest contraction since 2008, and consumer confidence fell in May to
its lowest level in more than a year.

Inflation breached the upper-limit of the official target range for
the first time since 2005 in April, when prices rose 6.51 percent. The
government targets inflation of 4.5 percent, plus or minus two
percentage points.}

Benchmark Rate

The central bank raised its benchmark interest rate a quarter of a
percentage point to 12 percent in April, after half point increases at
its previous two meetings this year. In the minutes of their meeting,
policy makers said they would keep raising borrowing costs for a
“sufficiently long” period to bring inflation back to the mid-point of
its target in 2012.

Traders are betting the central bank will raise borrowing costs
0.25 percentage points at its June 7-8 meeting, according to Bloomberg
estimates based on interest rate futures.

The real has gained 47 percent against the U.S. dollar since the
start of 2009, the second-best performance among 16 major currencies
tracked by Bloomberg after the Australian dollar. The currency fell 0.2
percent to 1.5778 per dollar at 8:11 a.m. New York time.

The yield on the interest rate futures contract maturing in in
January 2013, rose 1 basis points, or 0.01 percentage point, to 12.50
percent.

Brazil overtook Italy last year to become the world’s seventh-largest
economy, according to the International Monetary Fund.