UPDATE 5-Brazil keeps rates steady, sees no room for cuts yet

miércoles 20 de julio de 2016 19:58 GYT

(Recast, adds fresh analyst comment)

By Alonso Soto

BRASILIA, July 20 (Reuters) - Brazil's central bank kept interest rates on hold for the eighth consecutive meeting on Wednesday as expected, despite a deep recession, as a new board cited concern about stubbornly high inflation and uncertainty surrounding economic reforms.

In a longer and more detailed decision statement than in the past, the central bank said its nine-member board voted unanimously to leave the benchmark Selic rate at 14.25 percent, a nearly 10-year high. The rate has remained unchanged for a year.

"Taken together, the basic scenario and current balance of risks indicate there is no room to flexibilize monetary policy," read the statement, released online shortly after the policy meeting ended.

The bank's new governor Ilan Goldfajn, who took office in June, is aiming to improve communication and recover the credibility of a central bank that has failed to hit the 4.5 percent center of its official inflation target since 2010.

In a statement that differed greatly from the laconic ones of the recent past, the bank said its own 2017 inflation forecast had dropped to the target of around 4.5 percent, from a previous reading of 4.7 percent.

Still, it warned of lingering risks to reaching that goal, including the possibility that persistently high inflation could increase future expectations for sustained price rises.

Annual inflation likely remained close to 9 percent in mid July.   Continuación...