The National Monetary Council (CMN) this Thursday set the HICP-measured inflation target for 2025 at 3.00%, with a margin of tolerance of 1.50 percentage points higher or lower, interrupting a subsequent sequence of cuts to the objective that will be pursued by the Central Bank in its monetary policy.
The CMN also confirmed the maintenance of the targets of 3.50% for 2022, 3.25% for 2023 and 3.00% for 2024, even if the inflation projection for this year indicates that the actual data will be far from the target.
“The CMN believes that setting the inflation target in 2025 at 3.00% reduces uncertainty and increases the planning capacity of households, businesses and the government, stimulating investment, production and increasing the well-being of Brazilian society” , the Ministry of Economy said in a statement, adding that expectations for 2025 are anchored and that fiscal consolidation will contribute to achieving the goal.
The college is chaired by the Minister of Economy, Paulo Guedes, and is also composed of the President of the Central Bank, Roberto Campos Neto, and the extraordinary secretary for the Treasury and the Budget of the Ministry of Economy, Esteves Colnago.
In recent years, the Monetary Council has implemented a gradual reduction in the inflation target. The target started at 4.5% in 2018, dropping by 0.25 percentage points each year to reach 3% in 2024, a target repeated now for 2025.
With the shocks caused by the Covid-19 pandemic and, more recently, the war in Ukraine, inflation has come out of the hands of the Central Bank.
The index closed 2021 at 10.06%, well above the 5.25% ceiling, and the outbreak is expected to repeat this year, when the latest BC projections point to a HICP of 8.8%. Also for 2023 the monetary authority is already signaling that it will try to bring inflation to a level around the target, not exactly above the target. His projection for next year is 4%.
In the past, CMN has already adjusted its inflation target in the face of very significant shocks. This happened in 2003 and 2004.
Campos Neto, however, had already shown himself against this path. In March, he said that a change in the inflation target to cope with the pressures generated by recent shocks on the economy would have “little to be gained” in terms of credibility. He returned to do the same assessment in an interview this Thursday.
BC’s monetary policy is currently focused on 2023 inflation. Campos Neto said Thursday that, from August, 2024 will also enter the so-called BC relevant horizon.