BRASILIA, June 22 — Brazil’s central bank held its key interest rate unchanged a seventh straight time yesterday and gave no sign it was prepared to start lowering it soon, despite pressure from President Luiz Inacio Lula da Silva.

Citing uncertainty in the inflation outlook, the bank’s monetary policy committee called for "caution and temperance” and said its eight members had voted unanimously to hold the benchmark Selic rate at 13.75 per cent.

The decision was in line with market expectations.

But the central bank’s hawkish language may come as a surprise to some market-watchers in Latin America’s biggest economy, where inflation has returned within the bank’s target range and many analysts had started forecasting a rate cut could come soon.

"The strategy of holding the benchmark interest rate for an extended period of time has proven adequate to ensure inflation returns to target,” the committee said in its accompanying statement.

"The committee underlines that it will persevere until not only disinflation but market expectations return within its goals.”

Brazil’s annual inflation rate fell for an 11th straight time in May, to 3.94 per cent — a nearly three-year low, and well within the central bank’s current target range of 1.75 to 4.75 per cent.

However, the central bank remains concerned over expectations for future inflation, despite veteran leftist Lula’s insistence that the level of the key interest rate is "absurd” and stunting economic growth. — AFP