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UPDATE 1-Brazil cuts rates to 8.25 pct, signals gradual end to easing

(Adds comments from statement, background)

BRASILIA, Sept 6 (Reuters) - Brazil's central bank slashed interest rates to a four-year low on Wednesday to spur an incipient economic recovery, but said the pace of monetary easing would probably be reduced next month as the bank prepared to gradually stop cutting rates.

The bank's nine-member monetary policy committee, known as Copom, cut its benchmark Selic rate by 100 basis points for the fourth straight time to 8.25 percent. The decision was widely expected by economists in a Reuters poll.

With inflation holding near 18-year lows and far below the bottom of the central bank's target range, policymakers have slashed borrowing costs since last October in hopes of pulling the economy out of its worst recession on record.

However, after lowering interest rates from 14.25 percent a year ago, policymakers made reference to a "gradual ending to the cycle" in the statement accompanying the decision.

"Provided the committee's baseline scenario evolves as expected, and taking into account the stage of the monetary easing cycle, at this time Copom views a moderate reduction of the pace of easing as appropriate."

Inflation has remained very favorable, allowing policymakers to keep interest rates below their structural level to stimulate the economy, the committee said.

The bank revised up its inflation forecast for 2018 to 4.4 percent, from 4.3 percent at its previous meeting. The government's target is 4.5 percent. In August, the official rate fell to an 18-year low of 2.46 percent.

Brazil has resumed growth in the first half of the year, but high unemployment and low usage of production capacity by most companies after the recession continue to keep prices under control. That has led economists to expect interest rates to drop to as low as 7.25 percent by year-end, according to a central bank poll on Monday. (Reporting by Silvio Cascione; Editing by Lisa Shumaker and Andrew Hay)