The government sets inflation target at 3% for 2025 even with a 3-year explosion on the radar



For this year the central target of the National Monetary Council (CMN) for inflation is 3.50% and, for the next, 3.25%

BRASÍLIA – Even with the inflation target bursting on the radar for three consecutive years, the National Monetary Council (CMN) has maintained the target reduction strategy to be pursued by the Central Bank, with a decision on Thursday 23. The CMN has set the 2025 inflation target at 3.00%, the same one already adopted for 2024. For this year the central target is 3.50% and, next year, 3.25%, without changes.

The CMN is made up of the Minister of Economy, Paulo Guedes, the President of the Central Bank, Roberto Campos Neto, and the Special Secretary for the Treasury and the Budget of the Ministry of Economy, Esteves Colnago.

The inflation target is the direction of the Central Bank in its decisions on the direction of interest rates in the country. There is also a tolerance margin of 1.5 percentage points for more or less in all years in relation to the results of the HICP – official inflation index. In the case of 2024 and 2025, the lower limit is 1.5% and the upper limit is 4.5%. For the next year, the threshold is 1.75% and the ceiling is 4.75%.

After the CB failed to fulfill its main mandate in 2021, financial market estimates indicate a high probability that the target will be breached again this and next year, in a scenario of high, persistent and widespread inflation in different products and services.

According to the Focus Bulletin projections reported in the June Monetary Policy Committee (Copom) communiqué, the medians are around 8.5% for 2022 (well above the 5.0% ceiling) and 4, 7% for 2023. The BC, in turn, plans 8.8% and 4.0% respectively.

In this difficult inflationary environment, questions have increased about Brazil’s ability to achieve a lower inflation target, in line with international peers. But, as the Estadão / Transmission this week, most financial market economists expected the process started in 2017 to continue.

The assessment is that changing the rules in the midst of the “hurricane” tends to generate more damage to the credibility of the CB and, consequently, to the goal of inflation control.

Asked today about the discussions on changing the targets, BC president Roberto Campos Neto said that this does not increase the credibility of the central bank. “Editing a very long goal that is about to be achieved doesn’t gain credibility,” he said. “I understand the debate, but it is a decision of the CMN. We will follow a strategy with a goal that is given to us.”

In this month’s Monetary Policy Committee (Copom) minutes, the BC indicated that it is looking for an outcome for next year’s inflation closer to the center of the target (3.25%) and below its projection. current (4.00%). At a press conference today, Campos Neto said the college understands that the strategy of keeping Selic higher for longer is sufficient for this convergence.

For the next meeting, in August, the BC has already indicated a new rate hike, currently at 13.25%, equal (0.50pp) or lower in June. The monetary authority also reported that the strategy involves Selic at the end of 2023 above the baseline hypothesis (10%).


In 2017, during the Michel Temer government and after the creation of the spending cap, the CMN began setting the inflation target for the next three years and started a process of gradual reduction, by 0.25 percentage points to the year, towards the target of 3.00%. At the time, the 4.5% target had been in place since 2005 and was maintained for 2017 and 2018. The target system was created in 1999.

Source: Terra

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