UPDATE 1-Brazil's inflation could rise due to better economic indicators -Copom

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BRASILIA, Dec 17 (Reuters) - The Monetary Committee (Copom) of Brazil’s Central Bank sees the potential for inflation to rise as the state reduces its role as lender in favor of private capital and credit markets, according to the minutes of its latest meeting published Tuesday.

At the meeting, Copom highlighted that the most recent economic activity data has been positive, which could result in a faster than expected reduction in idle capacity throughout the economy.

It also suggested that rising meat prices, which have become a political headache for President Jair Bolsonaro amid strong Chinese demand, could drive inflation.

Last week, Brazil’s Central Bank reduced its benchmark Selic interest rate to a record low 4.5%, although it cautioned it may slow the pace of cuts in the future as economic recovery strengthens.

The next Copom meeting will take place on Feb. 4 and 5. Economists expect the Selic to fall an additional 0.25% at that meeting, according to the Focus poll published by the Central Bank. (Reporting by Marcela Ayres; Editing by Andrew Heavens and Chizu Nomiyama)