UPDATE 2-Brazil govt sets 2011 inflation target at 4.5 pct

Tue Jun 30, 2009 8:01pm EDT
* Brazil government sets 2011 inflation target of 4.5 pct
* Sees no evidence of inflation pressures going forward
* Target unchanged from 2009 and 2010 (Recasts, adds Finance Ministry statement)
BRASILIA, June 30 (Reuters) - Brazil's government set its inflation target for 2011 at 4.5 percent on Tuesday, seeing no evidence of significant inflationary pressures going forward.
The decision to keep the target unaltered from last year underscores the government's "goal of maintaining the credibility and flexibility of its monetary policy," the Finance Ministry said in a statement. The target was unveiled by Planning Minister Paulo Bernardo earlier on Tuesday.
"Inflation globally will accommodate (to lower levels), with no evidence of price upticks in the future," the statement said. "Despite all that, good policymaking practice calls for prudence."
The central bank uses the IPCA consumer price index as a guide when setting interest rates. The benchmark index BRCPI=ECI rose 0.47 percent in May, little changed from April, but some fear that a recovery in Latin America's largest economy may spark an uptick in consumer prices.
The index rose 4.89 percent in the year to mid-June, near the center of the target.
Brazil's central bank has reduced interest rates by 450 basis points since the beginning of the year, cutting in four straight policy meetings to help lift Latin America's largest economy out of recession.
The economy contracted 0.8 percent in the first quarter of 2009, after a 3.6 percent plunge in the fourth quarter of last year. It is expected to contract 0.5 percent in 2009, according to the latest weekly central bank survey of local financial institutions, against more than 5 percent growth in 2008. (Reporting by Isabel Versiani and Ana Paula Paiva; Writing by Ana Nicolaci da Costa; Editing by Dan Grebler and Guillermo Parra-Bernal, Gary Hill)