Nov 30 12:53 PM US/Eastern
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By ALAN CLENDENNING
AP Business Writer
SAO PAULO, Brazil
Brazil's economy expanded at half the expected pace in the third quarter as sky-high interest rates imposed by the central bank to keep inflation down prevented businesses from boosting production and hiring workers, the government said Wednesday.
Gross domestic product in South America's largest economy grew at a rate of 1 percent from July through September compared with the same period a year ago, the Brazilian Census Bureau said. Analysts surveyed by Dow Jones Newswires had predicted 2 percent growth.
When compared to the second quarter of 2005, the third quarter result showed Brazil's economy contracted 1.2 percent, the GDP's first quarterly decline in two years.
Surprised investors sent Brazil's benchmark Bovespa stock index down by nearly 1 percent in afternoon trading. Brazil's currency, the real, fell nearly 1 percent against the dollar.
Brazilian Trade Minister Luiz Furlan said the results were cause for concern and strong evidence that the central bank should consider steep decreases in the benchmark Selic interest rate, which stands at 18.5 percent.
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