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Brazil central bank says it supports free market pricing

(Recasts with Petrobras pricing controversy)

WASHINGTON, April 12 (Reuters) - Brazil's central bank chief on Friday refused to wade into a controversy over government meddling in pricing at Brazilian state oil giant Petrobras, but said he favored free market pricing and limited government interference in general.

Petroleo Brasileiro SA canceled a diesel price hike on Friday as President Jair Bolsonaro called for "fair" prices out of concern for truckers, fueling an 8 percent drop in preferred shares of the debt-laden oil company.

Brazilian central bank governor Roberto Campos Neto said it was not his place to comment on the move but said there was no risk of a return to price controls practiced under prior administrations.

"In general, obviously liberal economists believe in market prices that are as free as possible, markets with the least intervention possible," he said, speaking to reporters on the sidelines of the annual spring IMF and World Bank meetings in Washington. "We believe that this in the long run is what brings sustainable growth."

The former senior executive of Banco Santander Brasil SA said uncertainty about the approval of needed reforms in Brazil has limited the flow of foreign investment into the country.

Campos Neto said the Brazilian government still lacks a "focal point" to lead the relationship with foreign investors.

He praised the bill the government sent to Congress on Thursday related to central bank independence, saying the measure would allow for lower structural interest rates over time. (Reporting by Alex Alper; Editing by Richard Chang)