UPDATE 2-Brazil keeps Selic rate steady, 1st pause in 2 yrs
(Adds central bank votes, economists comments, inflation)
BRASILIA, Oct 17 (Reuters) - Brazil's central bank kept its benchmark lending rate unchanged at 11.25 percent on Wednesday, pausing for the first time after 18 consecutive rate cuts as inflation gains steam and economic activity quickens.
The bank's monetary policy committee, known as Copom, voted unanimously to leave the so-called Selic rate BRCBMP=ECI steady at an all-time low, ending a two-year cycle of interest- rate cuts.
Policymakers had slashed the Selic by 8.5 percentage points since September 2005, the longest string of rate cuts in Brazilian history.
"After evaluating the macroeconomic outlook, the Copom decided unanimously to pause the easing process of monetary policy," the bank said in a statement explaining its decision.
The Copom next meets to decide on rates on Dec. 4-5.
Out of 27 economists surveyed, 13 forecast that policymakers would keep the Selic unchanged. The other 14 expected rates to fall to 11 percent, indicating the uncertainties surrounding the bank's decision.
But the central bank's own unanimity on Wednesday suggests the bank's directors are no longer divided over the direction of monetary policy. Previous decisions included a 4-3 split vote in April, 5-2 in June and 4-3 again in July. In its September meeting, the Copom voted unanimously to lower the Selic.
"The unanimous vote is a show of unity after some meetings with some dissidents," said Silvio Campos Neto, chief economist at Banco Schahin in Sao Paulo. "The central bank wanted to send a message of confidence to the market."
Business leaders lamented the bank's decision, arguing that there was still plenty of room to lower rates without risking a spike in inflation.
The central bank warned last month that inflation pressures were spreading to the broader economy and that it considered leaving rates unchanged in September to keep prices at bay.
In its previous monetary policy meeting, the bank reduced the Selic by 25 basis points, trimming the size of rate cuts after two 50-basis-point reductions as inflation quickened.
FASTER INFLATION
Brazil's inflation rate accelerated in recent months as the economy expanded, raising concerns that price increases could intensify in coming months.
In its quarterly inflation report last month, the central bank raised its forecast for the IPCA inflation index in 2007 to 4 percent from a previously forecast 3.5 percent in June. For 2008, policymakers upped the inflation forecast to 4.2 percent from 4.1 percent. Continued...
