Brazil’s economy shrank in the third quarter more than analysts forecast as above-target inflation, deteriorating fiscal accounts and rising interest rates sapped confidence and crimped investment. Swap rates fell.
Coming up in the global economy this week, euro-area inflation may have picked up in November from a four-year low the prior month, demand for U.S. durable goods excluding transportation equipment probably improved for the first time in four months and the Brazilian central bank will probably increase its benchmark interest rate. Elsewhere, strikes by auto and mine workers probably caused South Africa’s economy to slow last quarter, while Sweden’s rebounded after shrinking from April through June.
Brazil central bank President Alexandre Tombini said policy makers are committed to their 4.5 percent inflation target, prompting traders to increase bets the key rate will be lifted half a percentage point next month.
Yields on Brazilian interest-rate futures contracts dropped for a third day on speculation the European debt crisis will prompt policy makers to make deeper cuts to the benchmark rate at the two-day monetary policy meeting beginning today.
Brazil’s central bank set reserve requirements on short dollar positions held by local banks in its third attempt since October to stem a rally in the currency. The real fell for a third consecutive day.