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UPDATE 1-Brazil's Guedes sees falling interest rates as the year turns, upbeat 2023 GDP

·1 min read

(Adds details, context)

BRASILIA, Aug 26 (Reuters) - Brazilian Economy Minister Paulo Guedes said on Friday that monetary easing will kick off in the country as soon as the year turns, which will help support much higher than expected GDP growth in 2023.

Speaking at an event hosted by agribusiness entrepreneurs, Guedes estimated that the key interest rate, which now stand at 13.75%, will start to decrease "as soon as the year turns."

Falling inflation and lower funding costs should boost Gross Domestic Product (GDP) next year, he noticed.

"It's going to be more than 2.5%, it's going to be 3%, 3.5% (growth)," he said.

The minister's forecasts contrast with market expectations of a mild 0.39% GDP rise next year, according to a central bank weekly survey. Private economists also project that interest rates will only begin to fall in June.

Policymakers have been giving signals that they may interrupt the world's most aggressive monetary tightening cycle in September, after pushing Brazil's benchmark Selic rate significantly above its 2% record low, reached in March 2021.

At the same time, the central bank has also indicated an intention to keep interest rates at a high level "for a sufficiently long period" to ensure inflation convergence towards official targets.

At a different event on Friday, central bank chief Roberto Campos Neto said Brazil has been "quite aggressive" in raising interest rates, with much of that policy shift still to impact the economy, but cautioned that policymakers could not afford to "let their guard down." (Reporting by Marcela Ayres; editing by Jonathan Oatis and Sandra Maler)