POLL-Brazil inflation keeps slowing in mid-March, rate cut bets grow

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SAO PAULO, March 20 (Reuters) - Brazilian consumer prices likely rose at the slowest pace in six months in mid-March, a Reuters poll showed, muddling the central bank's plan to halt interest rate cuts.

The benchmark IPCA index, due on Friday at 9:00 a.m. local time (1300 GMT), probably rose 0.12 percent from mid-February, according to the median of 23 forecasts ranging from 0.05 percent to 0.30 percent.

The annual rate likely slowed to 2.82 percent from 2.84 percent at the end of February and 2.86 percent in mid-February, the survey showed.

This suggests fading price pressures following a brief spike in the second half of 2017, which lifted the inflation rate from 18-year lows.

With the rate of price increases stubbornly below the official target range of 4.5 percent plus or minus 1.5 percentage points, the central bank will likely find plenty of space to cut rates to an all-time low on Wednesday.

Central bank chief Ilan Goldfajn acknowledged this month that the recent string of weak inflation figures caught policymakers by surprise. Some say that could drive them to hint at further easing in its policy statement this week.

"As inflation picture remains persistently benign, the central bank could leave the door open for additional rate cuts over the next few months," economists at Bank of America Merrill Lynch wrote in a report.

A Reuters poll showed most economists expect the central bank to cut the benchmark Selic rate by 25 basis points this week to 6.50 percent and then stand pat at its May meeting, though a minority forecast an additional reduction.

That would be a sharp reversal following the bank's recent communication after it strongly hinted at the end of rate cuts in its last policy statement.

Inflation has failed to gain momentum after ending last year below the official target range for the first time ever due to high unemployment and widespread idle capacity.

A record harvest drove sharp food deflation last year and food prices have been slow to rebound in recent months, while smaller-than-expected increases to school tuition fees kept a lid on price hikes. (Reporting by Bruno Federowski; Editing by Meredith Mazzilli)