Brazil's cenbank chief says economy out of crisis

DAVOS, Switzerland (Reuters) - Brazil’s economy is returning to normal and no longer needs so much fiscal stimulus, Central Bank President Henrique Meirelles said on Saturday.

Meirelles told Reuters the government’s plan to phase out tax cuts and tax breaks introduced to combat a recession in Latin America’s biggest economy was appropriate.

“I think it’s a proper move, the Brazilian economy is now out of the crisis,” he said on the sidelines of the World Economic Forum in Davos.

“We are going to a situation which is business as usual and I think this is a proper moment to withdraw fiscal stimulus.”

Brazil exited a six-month recession last year ahead of many more developed economies. The country's benchmark Bovespa stock index .BVSP surged 83 percent in 2009, while its currency, the real, strengthened 34 percent.

Meirelles said the central bank was considering whether to increase the level of reserves banks must keep, a step which would reduce the amount of liquidity available.

The central bank lowered the reserves level during the crisis, a change which is due to expire at the end of March.

Options under consideration are keeping reserves at their current lower rate, returning to the pre-crisis level or even increasing the levels further, Meirelles said.

“There (is) no commitment one way or the other, going back to the old level, keeping the present level, increasing somewhat -- there is no commitment and we will analyze that in due time.”

The central bank kept its benchmark interest rate steady at its record low of 8.75 percent on January 27 in a unanimous decision, but left the door open for a rate hike in coming months.

The January statement from policymakers omitted previous references to the remaining factory capacity gap and a benign inflation scenario, fuelling speculation it may raise rates as early as March.

Strong commodity price rises and expectations of 5 percent or more economic growth this year are fanning fears of upward inflation pressure, although Finance Minister Guido Mantega said on Friday he saw no inflation risks.

Meirelles said he was not yet ready to make a decision about his own future at the central bank, amid speculation he may run for political office.

“As a disciplined central banker I take decisions at the right time,” he said, and this was by the end of March.

Asked if he would like to be vice-president under Dilma Rousseff, chief of staff to current president Luiz Inacio Lula da Silva, he said: “I am honored by this kind (mention) of my name but I am not working toward that end.”

Brazil’s longest-serving central bank president has repeatedly said he is considering running for public office and joined the centrist PMDB party last September to keep that option open.

Reporting by Krista Hughes and Clara Ferreira Marques, editing by Mike Peacock