This week’s highlight is Wednesday’s rate announcement by the Central Bank’s policy committee (Copom). The market expects the authority will trim the benchmark Selic rate in 50 basis points to 11.0%. This is a largely expected outcome by both economists and traders, as continued reference to ‘moderate adjustments’ by BCB officials signals an intention to keep the easing cycle apace for now. Amid signs of slowing local growth and a worsening outlook abroad, many economists project the Central Bank will reduce interest rates to 9% sometime in 1H12.

 
Another widely awaited event is the release of October industrial production (IP), due on Friday. According to Itau BBA, weak foreign orders and tepid local spending have helped bring about an industrial de-stocking, holding back output early in Q4. The market expects a flat IP for the month and a 1.4% drop from year-earlier levels. Quarterly output should post an annualized contraction of 6%, the worst figure in the post-crisis. Q4 GDP at 2% annually? Let’s hope for that.

The week’s data docket also features November trade balance. The market projects a US$ 2.2 billion surplus, taking the past twelve-month balance up to US$ 33.0 billion, the highest reading since March 2008. For the month, exports to jump by 28%YoY (YTD: +30%) – led by still strong exports of iron ore and soybean. Imports to keep moving more softly (17%YoY, Vs. 26%YTD) on a slowing domestic demand.
On the inflation front, the most important release to watch this week is November IGP-M, due on Tuesday. The market expects a 0.48% headline – up from 0.44% in last IGP print (November IGP-10), led by a pickup in farm producer prices. The full-year expectation for  IGP-M is at 5.9%.

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