(Adds analysts' comments, market reaction and context)
By Alonso Soto and Silvio Cascione
BRASILIA, July 24 (Reuters) - Brazil's central bank signaled on Thursday it is unlikely to cut interest rates any time soon and instead is focused on curbing naggingly high inflation even as the economy flirts with recession.
In the minutes of its last policy meeting, the bank stressed that interest rates at current levels should help ease inflation in coming years. The comments quashed market speculation that a rate cut could be on the horizon, sending interest-rate futures higher.
The bank kept its benchmark Selic rate on hold at 11 percent for the second straight time last week, but surprised markets by not clearly spelling out its next policy moves, as it normally does.
That uncertainty and the risk that the Brazilian economy could already be in recession prompted some investors to bet the central bank would loosen policy.
In the minutes, the bank ruled out slashing borrowing costs for now.
"The committee anticipates an outlook of resistant inflation in coming quarters, but keeping monetary conditions stable - that is, taking into account a strategy that does not include a reduction of the monetary policy instrument - tends to get (inflation) in the path of convergence toward the goal," the bank said in the minutes.
Yields paid on Brazil's interest-rate futures contracts <0#2DIJ:> jumped higher on Thursday after the release of the minutes.
"The bank was very explicit to clear up any doubts from those who still thought policymakers planned to cut rates," said Juan Jensen, chief economist at Tendencias consultancy in Sao Paulo.
"We are probably already in a recession, but the inflationary outlook is so complicated that the bank cannot loosen monetary policy at this time," he added.
Many economists believe the economy contracted in the second quarter and that authorities will revise first-quarter figures to show contraction for that period too, which would mean Brazil has slipped into a recession. The national statistics agency is scheduled to release second-quarter gross domestic product data on Aug. 29.
The mix of high inflation and a slowing economy could threaten President Dilma Rousseff's re-election chances.
Senior officials told Reuters recently that curbing inflation is a top priority for the government, meaning that it is too early for the central bank to resume cutting interest rates.
Enestor dos Santos, economist at BBVA in Madrid, said the central bank is working to regain its inflation-fighting credibility and drag down inflation expectations.
He added that the bank's reference in the minutes to past macroprudential measures that eased rapid credit growth could signal policymakers could use those tools again to help some sectors of the economy.
"It is a reminder that macroprudentials are still there," dos Santos said.
Macroprudential policies are meant to care for the health of the financial system by increasing or reducing reserve and capital requirements as well as taxing financial operations.
Initially used to ease the flow of U.S. dollars into the economy and limit a rapid credit expansion, Brazil started to remove macroprudential measures as the economy weakened in 2012. (Writing by Alonso Soto; Editing by W Simon and Peter Galloway)