Brazil central bank says credit trends reinforce slowdown as rate cuts advance

BRASILIA, Sept 22 (Reuters) - Brazil's central bank said on Tuesday that trends in non-earmarked lending were consistent with a slowdown in economic growth, as tight monetary policy continued to restrain activity in Latin America's largest economy.

In the minutes of last week's policy meeting, at which it cut the benchmark Selic rate by 25 basis points to 13.75%, the bank highlighted a decline in longer-term non-earmarked credit lines, which tend to be more sensitive to monetary policy.

Last week's move marked the fifth consecutive cut of that magnitude since the bank began a cautious easing cycle in March, while reiterating that borrowing costs must remain restrictive to bring inflation back to its 3% target amid demand-driven price pressures.

The minutes showed few significant changes from August's message, with policymakers again keeping the path of future rate cuts open as they assess incoming data ahead of next month's general election.

The central bank board said short-term and emergency credit lines continued to expand, but at a slower pace, while earmarked lending kept growing for households, particularly through real estate credit, and for companies through loans backed by guarantee funds.

The minutes also said recent data pointed to a decline in consumer inflation, both in the headline index and across a range of underlying measures.

Policymakers noted that 12-month inflation had fallen below the 4.5% upper limit of the target range.

At the same time, the central bank flagged accelerating producer prices for both intermediate and consumer goods, contrasting with August's minutes, which had highlighted declining producer prices.