UPDATE 3-Brazil steps up monetary tightening to regain investor confidence

miércoles 3 de diciembre de 2014 19:34 GYT

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By Alonso Soto

BRASILIA Dec 3 (Reuters) - Brazil raised its key interest rate on Wednesday to a three year high, accelerating monetary tightening in a bold move to quell inflation and reinforce President Dilma Rousseff's shift toward more business-friendly policies.

In a unanimous vote, the central bank's monetary policy committee raised its benchmark Selic rate by 50 basis points to 11.75 percent, its highest since August 2011.

The size of the rate increase surprised many analysts who had expected the bank to opt for a second straight 25-basis-point hike to lower inflation that remains above the 6.5 percent ceiling of the official target.

Still, the central bank signaled in its statement that it could slow the pace of tightening at coming meetings given the lagging effects of past rate increases.

"Considering the accumulative and trailing effects of monetary policy, among other factors, the committee finds that additional monetary policy efforts should be implemented sparingly," the central bank said in its statement.

Rousseff has vowed to adopt more market-friendly policies to turn around an economy that has expanded just two percent a year since she took office in 2011, or less than half the average of the prior decade.

Her incoming finance minister, Joaquim Levy, has promised to rein in spending to restore public coffers depleted after years of high government outlays and dozens of controversial tax breaks.   Continuación...