PREVIEW-Market split on Brazil rate hike in March or April

* WHAT: Brazil's benchmark Selic interest rate decision

* WHEN: Wednesday March 17, after 6 p.m. (2100 GMT)

* REUTERS FORECAST: Thirteen of 31 economists surveyed by Reuters see central bank policymakers keeping the rate steady at 8.75 percent and 13 see a rate hike, with the remainder seeing hikes further out in the year. In both the March and the April scenarios, the majority of economists polled see the rise coming in at 50 basis points.

INFLATION CREEPS

Brazil's economic rebound has led to expectations of faster inflation this year, which could in turn pressure the central bank to hike rates.

Economists in a weekly survey by the central bank have consistently seen faster inflation for the year. In the survey released this week, the median 2010 inflation forecast rose to 4.99 percent from 4.91 percent the previous week.

Policymakers use an inflation target -- set at 4.5 percent, plus or minus 2 percentage points, in 2010 and 2011 -- as a guide in setting the Selic BRCBMP=ECI. Faster inflation thus makes a rate hike more likely.

Yet because the central bank raised some reserve requirements for banks in February, some analysts say policymakers have time before they need to raise the Selic to contain inflation.

DATA UNCLEAR

Recent data underscore the difficulty in timing a rate increase. Some figures, such as January retail sales, suggest that the economy is heating up. The retail data showed a 2.7 percent surge from December, outpacing the 1.6 percent median forecast in a Reuters survey. For more see [ID:nN11219188].

But Brazil's benchmark IPCA consumer price index rose less than expected in February, easing some fears about an imminent start to a tightening cycle. [ID:nN05193255]

Brazil's economy expanded 2 percent in the fourth quarter from the previous three months, near the 2.1 percent median forecast from analysts surveyed by Reuters.

Yields on Brazilian interest rate futures contracts <0#DIJ:> rose on Thursday, as investors saw higher chances of a rate hike after the retail sales and GDP data.

ANNUAL EXPECTATIONS

Economists see the Selic ending the year between 9.75 and 12 percent, according to the Reuters survey. A year-end forecast of 11.25 percent garnered eight responses, followed by an 11.75 percent forecast by five respondents.

Economists surveyed by Reuters expect the central bank to hike the rate gradually over the course of this year to contain expected inflation since monetary policy changes often have a delay before affecting markets. (Reporting by Vanessa Stelzer; Writing by Luciana Lopez; Editing by James Dalgleish)