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Brazil Anticipates a Decline in Long-term Inflation

Brazil's central bank anticipates a positive turn in the country's long-standing inflation concern.

Brazil Central Bank
Brazil Central Bank

Central Bank's Announcement on Inflation

Brazil's central bank chief, Roberto Campos Neto, made an optimistic announcement on Monday regarding the long-term inflation rate that has been a constant cause for worry for policymakers. Campos Neto predicted a downturn in inflation expectations, citing a more promising economic climate.

Current State of Brazil's Selic Benchmark Interest Rate

Brazil's Selic benchmark interest rate has been maintained at a cycle-high of 13.75% since September, a move that has frequently drawn flak from President Luiz Inacio Lula da Silva. Despite the central bank's emphasis on the necessity to continue the battle against inflation, Lula has criticized this policy as unwarranted, particularly in the face of easing consumer prices.

Focusing on favorable price trends in his recent addresses, Campos Neto stated that Brazil's current inflation rates are notably lower than those of wealthier nations. This has been attributed to an upswing in growth driven by agriculture, coupled with a downward revision of inflation, which is contrary to the global trend.

Monitoring Core and Service Inflation

Despite the gradual improvement in inflation, Campos Neto highlighted the improved performance in core inflation and service inflation – two areas the central bank closely monitors.

The Central Bank's Upcoming Rate-Setting Meeting

The central bank's upcoming rate-setting meeting has been scheduled for June 20-21.

Inflation Performance and Market Expectations

Brazilian inflation peaked at 4.07% in the 12 months leading to mid-May, with the inflation target set at 3.25% for the current year and 3.00% for the next. Based on the central bank's most recent weekly survey of private economists, market expectations for inflation have been reduced to 5.69% for this year and 4.12% for 2024.