UPDATE 3-Brazil holds interest rates, gives no clue on next move

miércoles 16 de julio de 2014 20:21 GYT

(Adds analyst comments and context)

By Alonso Soto

BRASILIA, July 16 (Reuters) - Brazil held interest rates unchanged for a second straight time on Wednesday but did not commit to keeping them stable for long as inflation remains high in Latin America's top economy.

The unanimous decision by the bank's monetary policy committee to hold the benchmark Selic rate at 11 percent was widely expected by the market after policymakers ended a year-long tightening cycle at their last meeting.

The bank surprised many in the market by repeating in its decision statement the phrase that it kept rates on hold "at this moment." Analysts and traders had expected some indication from the bank that rates could stay on hold for a prolonged period.

"Evaluating the evolution of the macroeconomic outlook and the outlook for inflation, the Copom decided, unanimously, at this moment, to keep the Selic rate at 11 percent per annum, without bias," the bank said, using exactly the same language of its last decision statement on May 28.

Despite pressure on the bank to hike rates to curb inflation that hit the 6.5 percent ceiling of the official target in June, policymakers had hinted that they were in no rush to act.

Disappointing growth data is expected to keep the central bank, led by Alexandre Tombini, from raising interest rates for the rest of 2014 even though inflation is expected to stay high for the next two years

"The current central bank board tends to keep options open for its future decisions without any commitments. It tends to rely on economic indicators," said Tatiana Pinheiro, economist with Banco Santander Brasil. "But we think the Selic rate will stay on hold at 11 percent through the rest of the year."   Continuación...