Brazil announces changes to inflation target system

Photo: Tete Escape/Shutterstock

In its Q1 2023 inflation report, the Brazilian Central Bank broke down some of the projection models used by its Monetary Policy Council to predict the behavior of inflation and decide on the interest rate (currently at 13.75 percent).

In it, the bank foresees that the country will not be able to bring inflation to its target until 2025 — which explains why it may make sense to change the timeframe for the monetary authority to reach the targets it has set.

This was one of the topics on the agenda of today’s meeting of the National Monetary Council (CMN) meeting, which will be attended by Central Bank head Roberto Campos Neto and the finance and planning ministers, Fernando Haddad and Simone Tebet. They are expected to confirm the 3 percent target for 2024 and 2025 and set the goal for 2026 with a slight change in the timeframe, and they did just that.

Instead of setting annual inflation targets that must be met each calendar year, the monetary authority should pursue its price goals within a “continuous” timeframe. “Starting in 2025, the current calendar year format will be replaced by a rolling 12-month target. The target of 3 percent was maintained and is the same target set for 2026,” said Mr. Haddad in the late afternoon, straight after the meeting.

If 3 percent is the target, the Central Bank...

Fabiane Ziolla Menezes

Former editor-in-chief of LABS (Latin America Business Stories), Fabiane has more than 15 years of experience reporting on business, finance, innovation, and cities in Brazil. The latter recently took her back to the classroom and made her a Master in Urban Management from PUCPR. At TBR, she keeps an eye on economic policy, game-changing businesses, and people driving innovation in Latin America.