UPDATE 2-Brazil central bank vows perseverance as inflation fails to subside

jueves 11 de junio de 2015 11:06 GYT

(Recasts lead, adds analyst comments and context)

By Alonso Soto and Silvio Cascione

BRASILIA, June 11 (Reuters) - Brazil's central bank on Thursday vowed to prevent inflation from remaining high for the long-term, signaling policymakers are not done yet hiking interest rates and could keep them elevated for some time despite fears of a recession.

In the minutes of its last rate-setting meeting last week, the bank said "determination and perseverance" are needed to prevent this year's high inflation from extending into the future.

A weaker Brazilian real and hikes in government-regulated prices such as electricity propelled inflation to an 11-year peak of 8.47 percent in May, raising pressure on the central bank to tighten further.

The bank said also that its 2016 inflation estimate has not changed since its previous meeting, remaining above 4.5 percent, the center of its 2.5 percent to 6.5 percent target range. The bank is expected to reveal its latest inflation estimates later in June.

Analysts said the minutes flagged that the bank will continue to increase rates despite resistance within the government and among lawmakers that higher rates will deepen what is expected to be Brazil's worst recession in 25 years.

"The bank toughened its tone on inflation. Determination points to a continuation of the hikes, raising the chance of another 50-basis-points increase in July," said Alessandra Ribeiro, economist with Tendencias in Sao Paulo. "Perseverance means the Selic will remain high for longer than the market expected."

Unfazed by growing criticism to its aggressive monetary tightening, the bank last week raised its benchmark Selic rate by 50 basis points for the fifth straight time to 13.75 percent, the highest among the world's major economies.   Continuación...