UPDATE 3-Brazil holds interest rates to avoid deepening recession
(Adds analyst comment, historical and political context)
By Alonso Soto
BRASILIA, March 2 (Reuters) - Brazil's central bank kept interest rates on hold on Wednesday as widely expected, opting to avoid inflicting more harm on an economy mired in its worst recession in decades despite a surge in inflation.
In a split vote, the bank's monetary policy committee, known as Copom, kept its benchmark Selic rate at 14.25 percent for the fifth straight time. An overwhelming majority of analysts expected the bank to maintain borrowing costs at a near-decade high.
Two of the Copom's eight members once again dissented and voted for a 50-basis-point rate hike.
A statement from the bank repeated almost exactly the language from its previous meeting, arguing that the global economic downturn was the main reason to hold borrowing costs steady.
The bank is under growing pressure from businesses and politicians to start cutting rates that are the highest among G20 countries so as to help an economy on track for its worst recession since at least 1901.
"The central bank once again showed it's not worried with rising inflation expectations. It lost its credibility," said Juan Jensen, partner with 4E Consultoria in Sao Paulo. "This is a central bank that is more lenient with inflation. It is not worried about inflation."
Jensen is among a growing chorus of economists who believe the bank will cut rates later this year to prioritize growth over inflation, which is well above the 4.5 percent center of the official target. Continuación...