Brazil's economic activity rises less than expected in August

BRASILIA (Reuters) -Brazil's economic activity increased less than expected in August, central bank data showed on Thursday, as a growing chorus of economists anticipate a sharper slowdown ahead amid tight monetary policy.

The IBC-BR index, seen as a proxy for the gross domestic product (GDP) indicator, was up 0.4% in August from the previous month, while economists polled by Reuters were expecting a 0.6% expansion.

Brazilian policymakers have emphasized that Latin America's economy is cooling as expected, while keeping the benchmark Selic rate at 15%, its highest level in nearly two decades.

They continue to stress the need for a prolonged period of stability to bring inflation down to the 3% target.

On Wednesday, Paulo Picchetti, central bank director of international affairs, dismissed the prospect of a recession.

In contrast, some politicians and economists have warned of a sharp slowdown, with Finance Minister Fernando Haddad arguing that borrowing costs remain excessively restrictive, despite acknowledging on Wednesday that core inflation remains elevated and the central bank is acting accordingly.

The IBC-Br index, which incorporates the central bank's estimates for farming, industry and services along with production-related taxes, showed that only the farm sector contracted in August, down 1.9% from July.

The index rose 3.2% in the 12 months through August, according to non-seasonally adjusted data.

(Reporting by Marcela Ayres; Editing by Toby Chopra, Kirsten Donovan)

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