UPDATE 2-Brazil keeps benchmark rate steady to slow prices

(Adds retail sales and industry data, economist comments)

By Elzio Barreto

SAO PAULO, Dec 5 (Reuters) - Brazil's central bank kept its benchmark Selic lending rate BRCBMP=ECI at an all-time low of 11.25 percent on Wednesday, pausing for a second straight monetary policy meeting as faster economic activity threatens to stoke inflation.

The bank's monetary policy committee, known as the Copom, voted unanimously to leave rates unchanged. The central bank in October paused for the first time after 18 consecutive rate cuts, ending a two-year cycle of monetary easing as inflation veered toward its target this year.

"Evaluating the macroeconomic scenario and the outlook for inflation, the Copom decided unanimously to keep the Selic rate at 11.25 percent, without bias," the bank said in a statement explaining its decision.

All 20 economists in a Reuters poll expected the bank to keep the rate unchanged.

Policymakers have warned that economic expansion in Brazil has been robust and could cause localized inflation pressures to spread.

ROBUST ECONOMY

Data for retail sales, industry activity and unemployment in Brazil showed the economy is on a steady growth path. Industrial output posted its biggest month-on-month gain in October in four years, the government said on Wednesday.

Retail sales rose twice as fast as analysts expected in September and the jobless rate fell to the third lowest level on record in October.

"These recent activity indicators are consistent with the pause the central bank implemented in October and that it has now extended" until January, said Marcelo Carvalho, chief Brazil economist for Morgan Stanley in Sao Paulo.

The benchmark IPCA inflation index rose 4 percent in the 12 months through mid-November and is expected to stay below the central bank's target of 4.5 percent for 2007 and 2008. Still, a recent pick up in food prices has put the bank on alert.

Economists in a weekly central bank survey released on Monday forecast the IPCA index will rise 3.96 percent in 2007 and 4.1 percent in 2008, below the bank's target.

The Copom next meets to decide on rates on Jan. 22-23. (Additional reporting by Isabel Versiani and Vanessa Stelzer; editing by Leslie Adler)