UPDATE 4-Brazil opts for steep rate hike in end to bold tightening

miércoles 29 de julio de 2015 22:01 GYT

(Adds link to Brazilian real)

By Alonso Soto

BRASILIA, July 29 (Reuters) - Brazil raised interest rates to a nine-year high on Wednesday, but signaled it was ending one of the world's most aggressive tightening cycles despite fears that a weakening local currency could stoke already high inflation.

In a unanimous vote, the central bank's monetary policy committee, known as Copom, hiked the benchmark Selic rate by 50 basis points for a sixth straight time to 14.25 percent, the highest among the world's top 10 economies.

The move, which takes the Selic to its highest level since July 2006, was expected by a majority of economists and traders.

In its decision statement, the bank clearly signaled it will halt the monetary tightening and keep rates on hold for some time as an imminent recession hampers consumer spending.

"The Committee understands that maintaining the benchmark interest rate at that level, for a sufficiently prolonged period, is needed to ensure that inflation converges to the target by the end of 2016," the bank said.

In an unusual move, international affairs director Tony Volpon abstained from voting. He was the focus of controversy after declaring he intended to vote for more hikes until inflation expectations were anchored.

Before the meeting the central bank came under pressure to press ahead with the rate-hiking cycle started in October as President Dilma Rousseff drastically cut her government's fiscal savings target, sparking a sell-off in local currency markets that will likely fuel inflation.   Continuación...