UPDATE 1-Brazil govt expects interest rates to move closer to 'neutral level' - official

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SAO PAULO, Jan 31 (Reuters) - Brazil's government expects interest rates to get closer to their neutral level this year, Economy Ministry official Guilherme Mello said on Wednesday, adding that inflation has been showing positive surprises "month after month".

"Conditions are in place for interest rates to keep falling," Mello said in an interview with TV channel GloboNews, as the central bank board gathers later in the day for its first monetary policy decision of 2024.

Brazil's central bank has lowered its benchmark interest rate by a total 200 basis points to 11.75% since it kicked off an easing cycle in August, and is widely expected to deliver a fifth consecutive 50-basis-point cut on Wednesday.

"We expect interest rates to move into more neutral territory, they are still at a contractionary level," Mello said.

He noted that inflation is likely to end this year a lot closer to its official target than it did in 2023, even after the government decided to tweak the goal downwards to 3%, plus or minus 1.5 percentage points.

Brazil's benchmark IPCA consumer price index ended 2023 at 4.62%,

within the target range

of 1.75% to 4.75%. Mello said he expects the index to drop closer to 3.5% this year. (Reporting by Gabriel Araujo; Editing by Steven Grattan)