UPDATE 1-Brazil's inflation holds steady above target midpoint in mid-October

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BRASILIA, Oct 23 (Reuters) - Inflation in Brazil unexpectedly held steady in mid-October above the midpoint of the official target, giving the central bank plenty of time to increase interest rates in the coming months.

Consumer prices tracked by the benchmark IPCA index rose 4.53 percent in the 12 months through mid-October, government statistics agency IBGE said on Tuesday, flat against the rate seen at the end of September but above the 4.28 percent rate in mid-September.

Economists polled by Reuters had predicted a 4.59 percent reading. The central bank targets a 4.5 percent year-end rate for 2018 and 4.25 percent for 2019, plus or minus 1.5 percentage points.

Food prices rose sharply in mid-October after falling for several months, pressuring the index. Fuel prices also jumped due to a weaker currency, adding to transportation costs.

But there are growing signs that underlying inflation pressures are simmering as Latin America’s largest economy gradually recovers from a deep recession.

So-called core inflation, which strips the index of volatile components, has accelerated from around 3 percent to above 3.5 percent over the last few months, as higher import costs spilled over more widely.

The IPCA index rose 0.58 percent from mid-September, IBGE said, below a median economist forecast of 0.64 percent.

The central bank has held interest rates at a record-low 6.50 percent for months, but acknowledged that a hike could come soon if the outlook deteriorates in the wake of a September currency selloff.

But the Brazilian real rebounded in October as right-wing candidate Jair Bolsonaro, who is favored by investors, looked increasingly certain to win this month’s presidential elections, suggesting policymakers may take their time before tightening. (Reporting by Bruno Federowski Editing by Paul Simao)