By Fernando Exman / REUTERS

BRASILIA, July 22 (Reuters) - Brazil's central bank slashed interest rates for a fifth time running to a record low on Wednesday in a further attempt to revive growth and lift Latin America's largest economy out of recession.

The bank's monetary policy committee, known as the Copom, voted unanimously to cut the so-called Selic rate BRCBMP=ECI to 8.75 percent from 9.25 percent, extending a monetary easing cycle that started in January. "The committee believes that, at this moment, this level of interest rate is compatible with a benign inflation scenario and contributes to the convergence of inflation into its target along the relevant time horizon and the inflation-free recovery of economic activity," the central bank said in a statement.

The cut in the Selic was in line with the predictions made by 32 of the 34 analysts surveyed by Reuters last week. The remaining two analysts had forecast a 25-basis-point rate reduction.

Policymakers have slashed borrowing costs by 500 basis points since the beginning of the year, including the reduction on Wednesday to boost the economy. Twenty-four out of the 34 economists in the Reuters poll expect Wednesday's rate cut to be the last of 2009.

Brazil's 12-month inflation rate to June was 4.8 percent, down from 5.2 percent in the year to May and near the central bank's target, according to government figures. Economists in a weekly central bank survey bet the benchmark IPCA inflation index will fall within the 4.5 percent inflation target for this year and next, opening the way for rates to remain at a record low for several months, economists said. "This 8.75 percent rate will be here for a good while," said Newton Rosa, chief economist of SulAmerica Investimentos in Sao Paulo. "As they signaled in their own statement, they're saying that this rate is adequate for the inflation target and they want to see the impact of their monetary policy, the 500 basis-point cut so far, on the economy and on inflation." "So this is a pause to evaluate exactly how the economy reacts and the effect of these cuts," Rosa added.

The latest rate cut comes despite signs that Brazil's economy is rebounding after entering a recession in the first quarter of the year. The decision also took place a day after President Luiz Inacio Lula da Silva said he saw room for further reductions in local borrowing costs.

Lula-sponsored tax breaks in key construction, automobile and home appliances industries and record credit concessions to large and small-sized companies by state-run banks have helped retail sales and mitigated a plunge in industrial output.

As a result, the economy added payroll jobs for a fifth straight month in June

Still, Brazil's gross domestic product is expected to contract 0.34 percent this year, according to the latest weekly central bank survey of local financial institutions. Brazil's economy shrank 0.8 percent in the first quarter of this year after a 3.6 percent slump in the last quarter of 2008.

The country fell into recession in the first quarter of this year, contracting 0.8 percent after a 3.6 percent fall in the last quarter of 2008. (Reporting by Fernando Exman; editing by Carol Bishopric) (Additional reporting Luciana Lopez in Sao Paulo, Writing by Elzio Barreto and Guillermo Parra Bernal)