(Adds central bank and analyst comments and report details)
By Silvio Cascione and Alonso Soto
BRASILIA, March 30 (Reuters) - Brazil's central bank said on Thursday that lower inflation could allow it to step up its pace of interest rate cuts and help pull the once-booming economy out of its worst recession ever.
In a quarterly inflation report, the bank lowered its 2017 inflation market forecast to 4.0 percent from 4.7 percent in its previous report. For 2018, its estimate remained at 4.5 percent, at the center of its official target.
A more widely spread process of disinflation "strengthens the chances of a moderate intensification of the pace of monetary easing," the bank said.
At its last two meetings, the bank has cut its benchmark Selic rate by 75 basis points each time. Still, at 12.25 percent, it remains one of highest reference rates for major global economies.
"That 'moderate intensification' signals that the bank is considering cutting rates by 100 basis points, but not by 125 basis points," said Thais Zara, chief economist with Sao Paulo-based consultancy Rosenberg.
The length of the rate-cutting cycle will depend on the 2019 inflation estimates and the forecast for the country's structural rates, or the rate that is neutral to inflation, the bank said.
The bank said its market forecast for annual inflation until the first quarter of 2019 stood at 4.6 percent.
The bank also lowered its economic growth forecast to 0.5 percent from 0.8 percent for 2017, standing now in line with the government and market forecasts.
A painfully slow recovery after two years of deep recession have dragged down inflation that just over a year ago had swelled to above 10 percent. Annual inflation currently stands at 4.76 percent. (Reporting by Silvio Cascione and Alonso Soto; Editing by Chizu Nomiyama and Bernadette Baum)