August 7, 2018 / 12:03 PM / 7 days ago

UPDATE 1-Brazil central bank still reluctant to offer policy outlook

(Adds details of minutes, context)

By Bruno Federowski and Patricia Duarte

BRASILIA/SAO PAULO, Aug 7 (Reuters) - The Brazilian central bank still preferred not to provide hints over the next steps for monetary policy even as the outlook for inflation looked “comfortable,” according to the minutes of its last policy meeting.

Though the bank’s policymakers said risk that product shortages stemming from a truckers’ strike would push up inflation has dimmed, they kept from committing to a timeline for raising rates because of concerns over the foreign outlook and economic policy at home.

The bank last week kept the benchmark Selic interest rate at an all-time low of 6.50 percent and downplayed a recent spike in inflation past the midpoint of its target range as “temporary.”

Economists largely took that as a sign that the bank is unlikely to raise rates anytime soon, as double-digit unemployment rates and widespread idle capacity keep a lid on core inflation measures.

The minutes seemed to reinforce that view, saying upward risks to inflation have fallen and that in the absence of further shocks, the outlook for prices should remain “comfortable.”

Yet they also acknowledged that uncertainty remains high over the government’s willingness to pursue fiscal austerity and structural reforms, which is set to face a key test in October’s presidential elections.

“Increased uncertainty around the current conjuncture creates a need for higher flexibility for monetary policy, which warrants refraining from providing indications over the next steps for monetary policy,” the minutes said.

A recent Reuters poll showed most economists expect the central bank to wait until at least 2019 before hiking. (Reporting by Bruno Federowski in Brasília and Patricia Duarte in São Paulo; Writing by Bruno Federowski Editing by Bernadette Baum and Steve Orlofsky)

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