Brazil's central bank sees 2028 inflation close to target despite near-term pressures
Brazil's central bank sees 2028 inflation close to target despite near-term pressures
By Marcela AyresThu, June 25, 2026 at 1:01 PM UTC
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A drone view shows the Central Bank headquarters building in Brasilia, Brazil, December 26, 2024. REUTERS/Ueslei Marcelino
By Marcela Ayres
BRASILIA, June 25 (Reuters) - Brazil's central bank on Thursday published inflation forecasts showing price increases near target by the end of 2028, even as projections worsened significantly through 2027 amid expectations for resilient economic activity.
Annual inflation is expected at 3.1% in the final quarter of 2028, just above the 3.0% target, according to the bank's latest monetary policy report.
Despite a sharp upward revision to forecasts through 2027 - its current policy-relevant horizon - policymakers left projections for the remaining quarters of 2028 unchanged from the March report. Inflation is seen at 3.2% in the first and second quarters of 2028 and 3.1% in the third.
The outlook reflects an expected normalization of food prices after El Niño-related increases, as well as a higher real interest-rate path than previously assumed, policymakers said.
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In contrast, the central bank raised its inflation estimates across all quarters of 2026 and 2027, citing stronger-than-expected price pressures, a hotter economy and higher oil prices.
Policymakers also raised economic growth projections to 2.0% this year, from 1.6% earlier, citing strong farming and commodities production as well as "fiscal and credit stimulus," as President Luiz Inacio Lula da Silva rolls out measures to boost demand ahead of an October re-election bid.
Last week, the central bank unsettled markets by cutting interest rates for the third straight meeting, bringing them down by 25 basis points to 14.25%, and leaving its next steps open even as it flagged a notable deterioration in the inflation outlook.
Its estimates had projected inflation at 3.7% in the fourth quarter of 2027, above the target for its policy horizon at the time. However, policymakers said they were focusing on inflation one quarter ahead - a move many economists considered a stretch in order to justify continued interest-rate cuts.
(Reporting by Marcela Ayres; Editing by Andrew Cawthorne, Brad Haynes and Jonathan Ananda)
Source: “AOL Money”
