(Adds analysts' comments and context)
By Alonso Soto
BRASILIA, Sept 3 Brazil held interest rates
steady for a third straight time on Wednesday, signaling it is
in no rush to help an economy that fell into recession just
weeks before a heated presidential election.
The central bank's monetary policy committee, known as
Copom, unanimously decided to keep its benchmark Selic rate
at 11 percent, as had been widely expected by both
the market and analysts.
In a statement, the central bank said it evaluated the
economic and inflation outlook to make its decision, but removed
the phrase "at this moment," which analysts interpreted as a
sign that policymakers will leave rates steady for some time.
"The removal of that phrase reinforces the signal the bank
gave in the previous minutes that it will not cut rates in the
short term despite weak economic activity," said Alberto Ramos,
an economist with Goldman Sachs in New York.
The bank has said its past rate hikes will take some time to
take full effect on inflation, which remains at the 6.5 percent
ceiling of the official target.
Pressure on the bank to support an economy that has
struggled to grow since 2011 increased after data showed last
week that Brazil slipped into recession early in 2014 for the
first time in five years.
The bank has eased reserve requirements to bolster credit,
but kept interest rates at more than two-year highs to counter
high inflation and avoid any criticism of undue intervention
before a presidential vote in October.
Still, inflation is expected to remain high due to robust
consumption and likely increases in government-controlled prices
for fuel and electricity.
"We have high inflation and weak activity. Under those
circumstances it is very likely that the bank will keep rates on
hold for at least until the end of the year," said Juan Jensen,
chief economist with Sao Paulo-based consultancy Tendencias.
"What happens next year will depend on who wins the election."
Over the last three years the central bank slashed rates to
record lows of 7.25 percent under its chief Alexandre Tombini
only to make a U-turn and raise them aggressively as inflation
President Dilma Rousseff has partly blamed higher rates for
the country's recession in the first half of the year. Finance
Minister Guido Mantega has said he will work to create
conditions for the bank to cut rates in 2015.
After initially expecting a sharp monetary tightening next
year, some investors are betting rates won't have to go up as
much if environmentalist Marina Silva beats Rousseff in the
election. They believe Silva would provide a confidence shock by
adopting more market-friendly policies to ease inflationary
pressures that have surged under leftist Rousseff.
Brazil's interest-rate futures have fallen over the last two
weeks after Silva was thrust into the race following the death
of her party's candidate, Eduardo Campos, in a plane crash.
Silva has not said whether rates should be brought down next
year. She has promised to give full independence to the central
bank, a longstanding demand of investors and financial markets.
If elected, she is expected to change the bank's leadership.
(Reporting by Alonso Soto, editing by Walter Brandimarte, G
Crosse, Dan Grebler and Bernard Orr)