BRASILIA, Oct 16 (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.