UPDATE 1-Brazil hikes interest rates fifth time, no sign of stopping
By Luciana Otoni
BRASILIA Oct 9 (Reuters) - Brazil raised interest rates for the fifth straight time on Wednesday and gave no indication of backing off its battle with high inflation even as Latin America's largest economy struggles to pick up speed.
The central bank raised its benchmark Selic interest rate to 9.5 percent from 9.0 percent as expected by all but two of the 65 economists polled by Reuters last week.
The central bank made no changes to the statement accompanying its decision, suggesting it could maintain the current pace of rate rises at its next meeting, in November.
Before the meeting, most economists believed the Selic would end the year at 9.75 percent, according to a weekly central bank poll released on Monday.
However, a growing number of economists have started to bet that interest rates could climb back into double digits next year to ensure inflation expectations for 2014 and 2015 fall towards 4.5 percent, the center of the government's target.
Consumer price data released earlier on Wednesday showed 12-month inflation eased in September for the third straight month to 5.86 percent. But economists in the central bank's survey see little room for inflation to ease further, projecting a year-end rate of 5.82 percent.
Some analysts say the bank may need to raise rates to between 11 and 12 percent to get inflation back to 4.5 percent.
That would be a major disappointment for President Dilma Rousseff, who boasted last year that the days of high interest rates in Brazil were over as the Selic fell to an all-time low of 7.25 percent.
Brazil's economy, however, was slow to react to the monetary stimulus and has been stuck in a holding pattern of slow growth in the past three years. At the same time, inflation has remained stubbornly high, forcing the central bank to reverse course and start raising interest rates again.
Since April, the bank has raised the Selic by 225 basis points.
The repeat of the terse language used by the bank in its previous three decision statements may be taken by investors as a strong indication of another aggressive rate hike that could take the Selic to 10 percent on Nov. 27.
That scenario seemed more likely after central bank director Carlos Hamilton Araujo said last week that there was still "a lot of work to be done" to battle inflation.
Araujo, who is widely viewed as the most hawkish member of the eight-person monetary policy committee, made the comments after unveiling bank projections for inflation to remain above 4.5 percent until the third quarter of 2015.
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