Brazil's inflation to ease if interest rates hold steady -Tombini

BRASILIA, July 1 Tue Jul 1, 2014 6:23pm EDT

BRASILIA, July 1 (Reuters) - Interest rates at current levels should bring Brazil's inflation back to the center of the government target, central bank chief Alexandre Tombini said in an interview published on Tuesday, signaling he has no plans to raise borrowing costs anytime soon.

Tombini reiterated that inflation should end below the target's ceiling of 6.5 percent this year, adding that food inflation, which is blamed for a surge in prices earlier this year, is already "dissipating."

"I would like to reiterate that if monetary conditions are maintained, inflation would tend to converge toward the target over the relevant horizon for monetary policy," Tombini told the central bank's internal news outlet "Conex√£o Real."

He said that monthly inflation should remain low in coming months, but that 12-month inflation would likely remain high due to the surge in food prices at the start of the year.

Consumer prices rose 6.41 percent in the 12-month period through mid-June as the soccer World Cup pushed up demand for airline tickets.

The central bank's goal is to keep annual inflation at the center of the target range of between 2.5 and 6.5 percent.

The central bank forecasts that the annual inflation rate will likely drop to 5.1 percent in mid-2016 from an expected 6.4 percent at the end of 2014, edging closer to its 4.5 percent target, according to its quarterly inflation report released last week.

The bank's benchmark lending rate is currently at 11 percent after nine consecutive increases through April.

Link to the interview in Portuguese: bit.ly/TAMAuJ (Reporting by Alonso Soto; Editing by Lisa Shumaker)

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