FILE PHOTO: A drone view shows the central bank's headquarters in Brasilia, Brazil, December 26, 2024. REUTERS/Ueslei Marcelino/File Photo

SAO PAULO (Reuters) -Brazil's central bank said on Tuesday that it has entered a "new stage" in which policymakers opt to keep interest rates unchanged while evaluating whether the current level is enough to ensure inflation converges to its 3% target.

In the minutes from its latest meeting, where it held the benchmark Selic rate at a near two-decade high of 15% for the second consecutive time, the bank said that policymakers would not hesitate to resume a hiking cycle if deemed appropriate.

The rate-setting committee, nonetheless, acknowledged that the economic scenario is consistent with its current monetary policy stance, with the activity outlook pointing to a gradual moderation in growth.

"Now that the scenario has unfolded as expected, the committee begins a new stage in which it opts to keep the rate unchanged and to continue evaluating if... such strategy will be enough to ensure the convergence of inflation to the target," it said.

The central bank had halted in July an aggressive tightening cycle that added 450 basis points to the Selic rate since September 2024.

Policymakers vowed to remain vigilant and monitor the pace of activity, and particularly services inflation.

They noted that recent inflation readings showed a more favorable dynamic compared to what was expected earlier this year, but emphasized that deanchored inflation expectations remain a factor of discomfort shared by all committee members.

"Inflationary vectors remain adverse," the bank noted. "This scenario prescribes a significantly contractionary monetary policy for a very prolonged period to ensure the convergence of inflation to the target."

Brazil's 12-month inflation hit 5.13% in August, according to statistics agency IBGE. The central bank targets inflation at 3%, plus or minus 1.5 percentage points.

Finance Minister Fernando Haddad criticized the bank's monetary policy following the release of the minutes, saying in an interview with local outlet ICL that he saw "no justification" for the elevated borrowing costs.

"I believe there is room for interest rates to fall," he said.

(Reporting by Fernando Cardoso; Editing by Gabriel Araujo)