March 11 (Bloomberg) -- Brazilian inflation slowed in February for a second straight month, reinforcing bets the central bank won't need to boost interest rates in the months ahead to meet its target for consumer-price increases.

Consumer prices, as measured by the benchmark IPCA index, rose 0.49 percent last month, compared with a 0.54 percent increase in January, the national statistics agency said today.

The central bank ended its longest cycle of monetary easing last October after a surge in food prices coupled with rising consumer demand raised the chances inflation could accelerate above the 4.5 percent annual target. Policy makers voted last week to hold rates at a record low 11.25 percent for a fourth straight meeting.

``Effects from food and fuel shocks remain limited, allowing the central bank to remain in a wait-and-see stance,'' Alexandre Lintz, senior Latin America economist at Banco BNP Paribas in Sao Paulo, wrote in a note today. ``Therefore, no reasons to hike rates in the foreseeable future.''

The annual inflation rate in February remained above the central bank's 4.5 percent target for a second straight month. Inflation quickened to 4.61 percent in the 12 months through February from 4.56 percent in the previous period.

Lintz expects policy makers kept a ``hawkish tone'' at last week's board meeting, the minutes of which are scheduled to be published March 13. Bankers wanted to make sure they are viewed as being concerned about inflation, Lintz said.

Inflation Forecasts

Analysts raised their forecasts for 2008 inflation to 4.42 percent from 4.41 percent a week earlier, a central bank survey published yesterday showed. Forecasts for 2009 inflation rose to 4.30 percent from 4.20 percent four weeks ago.

Inflation slowed less than expected in February. Analysts had forecast a median 0.45 percent gain, according to a Bloomberg survey of 32 economists.

Still, the February figures were `` positive,'' Sao Paulo- based Citigroup analyst Stephan Frederico Kautz said in a note.

Traders increased their bets for an interest rate increase. The yield on the inter-bank deposit contract for Jan. 2, 2009, which reveals trader's future interest rate bets, rose to 12.03 percent at 10:19 A.M. New York Time from 11.989 percent on the previous day.

Education prices, fueled by seasonal tuition increases, jumped 3.47 percent in February, accounting for almost half of the gain in the IPCA index last month.

Food and beverages inflation, largely responsible for putting the annual rate over target this year, slowed to 0.60 percent in February from 1.52 percent in January.

To contact the reporter on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net; Jeb Blount in Rio de Janeiro at jblount@bloomberg.net

Last Updated: March 11, 2008 11:35 EDT