UPDATE 1-Brazil's Rousseff vows to fight inflation without high rates

Tue Apr 16, 2013 11:29am EDT

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BRASILIA, April 16 (Reuters) - Brazilian President Dilma Rousseff said on Tuesday her government will have no trouble fighting inflation "systematically" but that the country will not return to the high interest rates of the past.

Rousseff was speaking in Belo Horizonte a day before the central bank is set to announce its decision on whether to raise rates to curb high inflation, or keep them on hold to protect an economic recovery that has been sluggish.

Twelve-month inflation sped up in March to 6.59 percent, breaching the official target ceiling of 6.5 percent for the first time since November 2011. Some economists said the spike has increased the possibility that the central bank will raise its benchmark Selic rate by as much as 50 basis points on Wednesday.

The central bank has systematically cut its key rate to a record low of 7.25 percent since August 2011 to help spur the Brazilian economy. Until recently interest rates in Brazil were among the highest in the world, reaching 26.50 percent in 2003.

"We will never return to those interest rates that would go up to 15 percent anytime there was a need to adjust them," Rousseff said.

Brazil's once-booming economy grew by only 0.9 percent last year, making a return to robust expansion a priority for Rousseff, who is seeking re-election next year.

But the jump in inflation may lead her to take a harder stance, vowing to give no quarter in the battle to keep prices under control.

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