The slowdown in Brazilian GDP growth to 0.5% q/q in Q3, from 1.8% q/q in Q2, should be a shortlived blip and the economy appears to have picked up pace once again in Q4. Looking ahead to 2011, the bigger concern is not so much that the overall rate of growth will disappoint but that the economy will become increasingly unbalanced. This partly explains last night’s decision by the BCB to keep interest rates on hold at 10.75%.
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