S&P cuts Brazil credit rating in blow to Rousseff

BRASILIA (Reuters) - Standard & Poor's on Monday cut Brazil's sovereign debt rating closer to speculative territory in a blow to President Dilma Rousseff, whose efforts to stir the economy from a years-long slump have caused a deterioration in the country's finances.

Brazil had its long-term debt rating downgraded to BBB minus, the agency's lowest investment-grade rating. S&P changed its outlook to stable from negative, meaning further downgrades are unlikely for now, which will come as a relief for both politicians in Brasilia and financial markets.

The move was widely expected, but the timing prior to an October election, in which Rousseff will seek re-election, will still pose a headache for her left-leaning government.

"Mixed policy signaling by the government, with negative implications for fiscal accounts and economic policy credibility, coupled with a subdued outlook for growth over the next two years continue to weigh on Brazil's policy flexibility and performance profile," Standard & Poor's said.

The downgrade could prompt peers Moody's Investors Service and Fitch Ratings to signal they may also downgrade Brazil.

(Reporting by Alonso Soto; editing by Andrew Hay)