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Brazil's central bank maintains record low 6.5% interest rate

[BRASÍLIA] Brazil's Central Bank maintained its key interest rate at the historic low of 6.5 per cent on Wednesday, despite uncertainty related to next month's presidential elections and a weakening of the currency against the dollar.

Following 12 successive cuts, the key interest rate - the main tool in the fight against inflation - has been stable since March.

"The evolution of the situation encourages the maintenance of the rate at its current level," said the Central Bank in a statement.

Most analysts don't expect the rate to be increased again until 2019, when it should be raised to 8.0 per cent.

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Inflation accelerated unexpectedly in June, up 1.26 per cent on the previous month, due in part to a truckers' strike that paralysed the country at the end of May.

It slowed in July (+0.33) before a surprise drop of 0.09 per cent in August, leaving inflation at 4.09 per  cent for the year, still within the upper limit of the government's target inflation range: 3 to 4.5 per cent.

Inflation remains under control despite the real's struggles, where it hit a record low of almost 4.2 to the dollar last week.

It has lost more than 20 per cent since the start of the year as Brazil's at times surreal presidential election campaign creates nervousness in the markets.

Current opinion polls have right-wing ex-army captain and confirmed fan of torture by the 1964-85 military dictatorship, Jair Bolsonaro, and last-minute leftist Workers' Party (PT) substitute candidate Fernando Haddad in the lead.

Mr Haddad was only put forward by the PT a week ago after jailed former president Luiz Inacio Lula da Silva finally gave up on his attempts to stand in the election, for which he is barred due to Brazil's "clean-slate" law.

Mr Bolsonaro, meanwhile, is convalescing in hospital after he was stabbed by a leftwing activist while on the campaign trail earlier this month.

AFP