UPDATE 3-Brazil may end tightening after raising rates to two-year high

miércoles 2 de abril de 2014 20:17 GYT

(Adds analyst comments and context)

By Alonso Soto

BRASILIA, April 2 (Reuters) - Brazil raised interest rates to a two-year high on Wednesday, but signaled that it is ready to halt its aggressive monetary tightening if a surge in inflation subsides in coming weeks.

The central bank's monetary policy committee unanimously raised its benchmark Selic rate by 25 basis points to 11 percent, its ninth straight rate increase in a year. All of the 62 analysts surveyed by Reuters had predicted the increase.

The bank changed the language used in its decision statement to say that its 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 raise the rate at "at this moment."

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

Many analysts have said the bank could very well pause 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...