(Recasts with rate decision and bank statement)
By Alonso Soto
BRASILIA May 28 Brazil left its benchmark
interest rate unchanged on Wednesday, pausing one
of the world's longest-running tightening cycles to avoid
choking its weakening economy despite high inflation.
In a unanimous decision, the central bank's monetary policy
committee, known as Copom, kept its Selic rate at 11 percent,
breaking a streak of nine consecutive hikes as expected by a
majority of analysts and market traders.
Worries that higher rates could hurt an already fragile
economy and a slowdown in the pace of price increases has led
the central bank to change tactics even though inflation remains
close to the 6.5 percent ceiling of the official target.
In its decision statement, the central bank said it decided
to leave the rate unchanged "at this moment," signaling it has
not closed the door on more rate hikes in the future.
"Evaluating the evolution of the macroeconomic outlook and
perspectives for inflation, the Copom decided, unanimously, at
this moment, to maintain the Selic rate at 11.00 percent per
annum, without bias," the bank said in a statement.
Many economists said the bank needed to continue tightening
to anchor high inflation expectations even if it meant more pain
to an economy that has been stuck in a rut for the last three
Double-digit interest rates along with sagging business
confidence and a still subdued global economy has dragged down
activity in Brazil, once one of the world's fastest-growing
Brazil likely grew just 0.2 percent in the first quarter
from the previous quarter, slowing from a 0.7 percent expansion
in the prior reading, according to the median of 27 forecasts in
a Reuters poll. The commodities powerhouse is expected to grow
just 1.6 percent this year, down from 2.3 percent in 2013.
(Reporting by Alonso Soto; Editing by Meredith Mazzilli, W
Simon and Lisa Shumaker)