UPDATE 4-Brazil central bank cast doubt on rate hike as outlook worsens

martes 19 de enero de 2016 15:33 GYT

(Adds Reuters poll on Selic expectations in third graph)

By Alonso Soto and Silvio Cascione

BRASILIA Jan 19 (Reuters) - The Brazilian central bank on Tuesday signaled that a worsening recession could force it to abandon plans to aggressively raise interest rates to battle inflation at a 12-year high.

In an unusual statement, hours before the start of a two-day monetary policy meeting, central bank chief Alexandre Tombini said policymakers will take into consideration "significant" cuts in Brazil's growth outlook in their decision.

His comments considerably lowered market expectations for the bank to hike rates by 50 basis points, according a Reuters poll of economists on Tuesday.

Twenty-four out of 43 economists predict a 50-basis-point hike while the rest expects either a smaller increase or no rate hike at all. In a Reuters poll last week, 48 out of 59 economists expected a 50-point increase.

As Brazil suffers through its worst recession in more than a century Tombini is under tremendous pressure to keep rates steady to avoid further harm to an economy that has shed 1.5 million jobs in the past year.

President Dilma Rousseff's Workers' Party and powerful business and labor groups have called on the bank to keep the benchmark interbank rate at 14.25 percent, the highest among major economies, even though the bank has signaled that high inflation will require higher rates.

Dozens of union workers waving flags protested on Tuesday morning outside the central bank's regional office in Sao Paulo.   Continuación...