(Recasts with rate decision, statement by bank)
By Alonso Soto
BRASILIA, April 2 Brazil raised interest rates
for the ninth straight time on Wednesday, prolonging one of the
world's longest-running monetary tightening cycles after a surge
in food prices stoked already high inflation in an election
The unanimous decision by the central bank's monetary policy
committee raised its benchmark Selic rate by 25 basis points to
11 percent, its highest level in over two years. All of the 62
analysts surveyed by Reuters predicted the hike.
The bank changed the language used in its decision statement
to say that the bank's next monetary move would hinge on how the
Brazilian economy as a whole evolved.
"The committee will monitor the evolution of the
macroeconomic outlook until its next meeting, to then define the
next steps in its monetary policy strategy," the bank said.
In the statement, the bank removed a previous reference to
continuation of the adjustment cycle and instead added that it
decided to hike the rate at "at this moment."
Although another rate hike in May has not been ruled out,
the statement signaled that the bank would be very sensitive to
upcoming economic and inflation indicators to decide whether to
continue raising borrowing costs or end the cycle.
Many analysts have said the bank could very well end the
tightening cycle in May to avoid hampering the growth of an
economy that has been stuck in a rut for the last three years.
The central bank will have to find the right balance that
allows it to ease inflation and avoid further slowing growth as
President Dilma Rousseff prepares to run for re-election in
It is not an easy task for a bank that has struggled to
lower high inflation expectations despite a staggering 375 basis
point rise in the benchmark interest rate since April 2013.
Another inflation bout caused by a rise in food prices as a
severe drought hit crops in southeastern Brazil has threatened
to push inflation above the ceiling of the official target range
of between 2.5 and 6.5 percent.
(Reporting by Alonso Soto; Editing by Anthony Boadle)