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By Alonso Soto
BRASILIA, Oct 21 (Reuters) - Brazil's central bank kept interest rates on hold on Wednesday, standing pat for a second straight meeting despite a jump in inflation expectations to avoid doing more harm to an economy mired in its worst recession in decades.
In a unanimous vote, the central bank's monetary policy committee, known as Copom, kept the benchmark Selic rate at 14.25 percent, a nine-year high and still the highest among the world's top 10 economies.
The decision not to raise rates will give a breather to President Dilma Rousseff, who is fighting for her political survival amid the country's worst economic and political crisis in 25 years.
But the central bank did not entirely rule out a rate hike in the future.
The bank reiterated that rates will remain on hold for some time, but removed reference to a self-imposed goal of bringing inflation back to the 4.5 percent official target in late 2016.
Instead the bank said it was focused "on the horizon relevant for monetary policy."
"Copom stresses that monetary policy will remain vigilant to achieve that objective," the bank added.
Analysts interpreted the changes to mean the bank could raise rates if a weaker real further contaminates inflation expectations. Most agree the chances for a hike remain slim.
"The return of the 'vigilant' expression ... leaves the door open for an increase, although that would be unlikely," economists with Banco Fator wrote in note.
The central bank is betting that a recession will cool inflation. A sharp drop in investment and dwindling confidence threaten to push the economy into a projected recession of 3 percent this year, according to surveys of economists.
Until recently some economists had argued the central bank should follow the steps of fellow emerging market peers Russia and Turkey and opt for a "mega" rate hike to head off a looming currency crisis.
The wild swings of the Brazilian real in recent months have raised inflationary pressures.
Central bank chief Alexandre Tombini has acknowledged that the weaker real is a threat to the institution's prime goal of containing inflation, but says the price swings may be temporary and that the bank will not change its strategy for now.
Despite the recession, inflation has risen to near 10 percent, its highest in more than a decade.
The country's economic woes are fueling political gridlock in a Congress that has been threatening to oust Rousseff only a year after her re-election. (Reporting by Alonso Soto; Editing by David Gregorio, Christian Plumb and Leslie Adler)