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UPDATE 2-Brazil 2019 inflation rises above target on surging meat prices

Camila Moreira and Debora Moreira

(Adds comments from economists, policy context)

SAO PAULO/RIO DE JANEIRO, Jan 10 (Reuters) - Annual consumer inflation in Brazil accelerated in 2019 to a three-year high, edging past the center of a central bank target as surging meat exports drove up prices in the domestic market.

The benchmark IPCA consumer price index rose 4.31% in the full year, government statistics agency IBGE reported on Friday, above the official year-end target of 4.25%, which has a tolerance margin of 1.5 percentage points either side.

Still, economists said the sudden spike in meat prices was not enough to change the outlook for weak inflationary pressures amid a sluggish economic recovery, leading some to forecast even lower interest rates this year after four rate cuts in 2019.

"(December inflation) was very influenced by meat prices, which had more to do with supply rather than demand," said IBGE official Pedro Kislanov, who oversees the inflation data series.

Meat prices measured by the agency rose 18% in December from November amid a surge in Brazilian beef exports to China after an outbreak of African swine fever there.

That lifted Brazilian consumer prices 1.15% in the month, the biggest November-to-December increase since 2002 and above economists' forecast of 1.08%.

Still, economists said Brazil's central bank is likely to base its monetary policy on inflation expectations for coming years, which remain below official targets.

"The IPCA print doesn't change the debate about an additional rate cut of 25 basis points," said Carlos Lopes, an economist at Banco Votorantim. "While there is room for a cut, it poses some risks."

The central bank reduced its benchmark Selic interest rate in December to a record low of 4.50%, but flagged the need for caution in upcoming decisions. The bank's next rate-setting meeting concludes on Feb. 5.

Full-year 2019 inflation surpassed increases of 3.75% in 2018 and 2.95% in 2017, as well as the median forecast in a Reuters poll for annual inflation of 4.23%. (Reporting by Camila Moreira and Debora Moreira; Writing by Carolina Mandl and Brad Haynes; Editing by Nick Macfie)