(Adds Araujo comments and context)
By Alonso Soto
FLORIANOPOLIS, Brazil, Nov 18 (Reuters) - Brazil's central bank could fine-tune monetary policy to fight high inflation, director Carlos Hamilton Araujo said on Tuesday, leading investors to bet interest rates might rise more sharply in the next few months.
Araujo, the central bank's director of economic policy, said policymakers will not be complacent about inflation, although he admitted that economic growth has lagged its potential.
"If necessary, the (central bank) may recalibrate monetary policy in order to ensure a benign inflation outlook," Araujo said at a bank event in the southern city of Florianopolis.
Yields paid on long-dated contracts for interest-rate futures <0#2DIJ:> fell further after Araujo's comments, as traders said a more aggressive monetary tightening cycle now would make room for lower interest rates in the future.
The central bank shocked markets by raising interest rates on Oct. 29 by 25 basis points to 11.25 percent after a sharp depreciation of the Brazilian real accelerated already-high inflation.
The surprise hike was seen as a signal that newly reelected President Dilma Rousseff could adopt more market-friendly policies during her second term that starts on Jan. 1.
Since she won re-election on Oct. 26, Rousseff has kept markets guessing who she would pick as next finance minister and any other changes she would make to her economic team.
Araujo said that more clarity in the policy front will likely help lift business confidence and help the economy recover in 2015. Most economists agree the economy will barely grow this year and next.
Even with the slow recovery the central bank estimates inflation will tend to converge toward the center of the government target of 4.5 percent only in 2016, Araujo said, adding that policymakers expect the exchange rate to remain volatile.
A weakening real, which has depreciated more than 9 percent so far this year, has fueled inflation in Latin America's largest economy by pushing up the cost of imports.
Brazil's consumer prices rose 6.59 percent in the 12 months through October, easing from the previous month, but still above the official target ceiling of 6.5 percent.
Inflation has averaged 6 percent since Rousseff took office in 2011, up from the 5.4 percent average of the previous three years. Economists expect year-end inflation of 6.4 percent in 2014 and 2015. (Reporting by Alonso Soto; Writing by Walter Brandimarte and Alonso Soto; Editing by Franklin Paul, Andre Grenon and Richard Chang)