UPDATE 2-Brazil raises key interest rate to two-year high

miércoles 2 de abril de 2014 19:23 GYT

(Recasts with rate decision, statement by bank)

By Alonso Soto

BRASILIA, April 2 (Reuters) - Brazil raised interest rates for the ninth straight time on Wednesday, prolonging one of the world's longest-running monetary tightening cycles after a surge in food prices stoked already high inflation in an election year.

The unanimous decision by the central bank's monetary policy committee raised its benchmark Selic rate by 25 basis points to 11 percent, its highest level in over two years. All of the 62 analysts surveyed by Reuters predicted the hike.

The bank changed the language used in its decision statement to say that the bank's next monetary move would hinge on how the Brazilian economy as a whole evolved.

"The committee will monitor the evolution of the macroeconomic outlook until its next meeting, to then define the next steps in its monetary policy strategy," the bank said.

In the statement, the bank removed a previous reference to continuation of the adjustment cycle and instead added that it decided to hike the rate at "at this moment."

Although another rate hike in May has not been ruled out, the statement signaled that the bank would be very sensitive to upcoming economic and inflation indicators to decide whether to continue raising borrowing costs or end the cycle.

Many analysts have said the bank could very well end the tightening cycle in May to avoid hampering the growth of an economy that has been stuck in a rut for the last three years.   Continuación...