June 23 (Bloomberg) -- Brazil’s swap rates dropped as economists cut their growth outlook for a fourth straight week,

adding to speculation that policy makers will limit further increases in borrowing costs.
Swap rates on contracts maturing in January 2017 fell four basis points to 11.50 percent at the close in Sao Paulo.

The real advanced 0.5 percent to 2.2186 per U.S. dollar, the strongest level since May 22.
    

Economists lowered their growth forecast for gross domestic product this year to 1.16 percent

from 1.24 percent a week ago, according to the median of about 100 estimates in a central bank survey published today.

Slowing expansion spurred Brazil to hold its benchmark lending rate at 11 percent on May 28

after nine consecutive increases to curb inflation.
    

“We do not see a recovery in the short term,” Luciano Rostagno, the chief strategist at Banco Mizuho do Brasil

in Sao Paulo, said in a telephone interview. “There won’t be room for a rate increase again this year.”
President Dilma Rousseff is battling a combination of accelerating inflation and a slowing economy

as the October election approaches.
Banco Santander SA reduced its outlook for Brazil’s growth in 2014 to 0.9 percent from a prior 1.3 percent,

citing a plunge in consumer and business confidence as well as a slump in credit markets and high inventories.

Faster Inflation

The national statistics agency reported last week that inflation accelerated in the 12 months

through mid-June to 6.41 percent, approaching the 6.5 percent upper level of the official target range.

The central bank is due on June 26 to publish its quarterly inflation report, which will include its revised estimate

for GDP growth.
To support the real and limit import price increases, Brazil sold $198.5 million of foreign-exchange swaps today

and rolled over contracts worth $494.7 million.
    

The central bank announced June 6 that it was extending its intervention, which had been scheduled to end this month.

Policy makers may affect currency trading when they announce details of the program, Rostagno said.