UPDATE 2-Brazil raises interest rate back to double digits
BRASILIA, Nov 27 (Reuters) - Brazil raised interest rates on Wednesday for the sixth straight time, ending a short-lived era of single-digit borrowing costs that failed to reignite Latin America's largest economy and instead fed inflation.
The central bank's monetary policy committee, known as Copom, unanimously raised its Selic to 10 percent from 9.50 percent -- its highest level since March of 2012. All but two of the 62 analysts polled by Reuters last week expected the bank to hike rates by half a percentage point for the fifth straight time after a quarter percentage point increase in April.
The bank changed its decision statement, removing a previous reference to monetary tightening helping put inflation in a declining trend for next year.
"Continuing the adjustment of the benchmark interest rate, begun at the April 2013 meeting, Copom decided unanimously to raise the Selic rate to 10 percent per annum, without bias," the bank said in the statement.
The change in language was interpreted by some analysts to mean the bank could slow the pace of rate hikes depending on upcoming economic data.
The return to double digits is a political setback for President Dilma Rousseff, who made lower rates a key economic goal of her government. The Selic stood at 10.75 percent when she took office in 2011.
After raising rates early in her term, the central bank aggressively slashed the Selic to a record low 7.25 percent in October 2012. The government hoped the cuts would usher in a new era of cheap credit and sustained economic growth.
However, lower rates failed to speed up the economy, which was held back by another historical drag on Brazilian growth - high inflation. Inflation forced the central bank to change course, raising the benchmark rate by 2.75 percentage points since April in a bid to bring annual consumer price increases back to the 4.5 percent center of its target range.
"The fact that they changed the statement signals they are not sure that process will continue with another 50 basis point increase," said Gustavo Mendoca, economist with Saga Capital in Rio de Janeiro. "They left it open that they could go with the same pace or reduce it to a 25-basis-points hike in the next meeting."