UPDATE 2-Brazil central bank signals smaller interest rate hike

jueves 11 de diciembre de 2014 09:02 GYT

(Adds analysts' comments and details from minutes)

By Alonso Soto

BRASILIA Dec 11 (Reuters) - Brazil's central bank signaled on Thursday it may slow the pace of monetary tightening at its next meeting as it expects the government to limit spending and inflation to ease in coming years.

In the minutes of its last rate-setting meeting, the bank said inflation could accelerate in the short term and remain high, but price increases should begin to slow in 2015.

The central bank last week raised its Selic rate by 50 basis points to 11.75 percent, stepping up monetary tightening to battle inflation and reinforce President Dilma Rousseff's efforts to regain investors' confidence.

The bank hinted then it may reduce the size of future rate increases given the lagging effects of previous monetary tightening.

In the minutes, the bank reinforced that message with expectations that inflation would subside gradually starting in 2015.

"It (the bank) anticipates that inflation is likely to remain high in 2015, but next year it should enter a long period of decline," the text said.

It added that the bank sees inflation converging toward the center of the official target, 4.5 percent, in 2016. The inflation target ranges from 2.5 percent to 6.5 percent.   Continuación...