Brazil’s Central Bank estimates inflation of 4.8% in 2023

The Brazilian Central Bank (BC) estimated inflation above the target in 2023. The monetary authority’s projection went from 4.6% in September to 4.8% in October.

The new percentage was disclosed on Tuesday, November 1, in the minutes of the Copom (Monetary Policy Committee).

The report gave details of the last meeting of the collegiate, which decided, for the second time in a row, to maintain the basic rate, the Selic, at 13.75% a year.

The inflation target for 2023 is 3.25%, as defined by the CMN (National Monetary Council).

There is a tolerance interval of 1.5 percentage points, more or less, from 1.75% to 4.75%.

With the projection of a rate of 4.8%, the Central Bank is now predicting that the target will be breached.

If the monetary authority does not manage to bring inflation within the target range, it may miss the goal for the 3rd year in a row.

The base interest rate is the main instrument to control the country’s official inflation. The IPCA (National Consumer Price Index) has slowed down in the last three months.

The accumulated rate over 12 months cooled to 7.17% in September. It was 8.73% in August.

A large part of the rate reduction is due to the measure to limit the rate of ICMS (Brazilian VAT) on gasoline, electricity, and telecommunications.

President Jair Bolsonaro (Liberal Party – PL, right) sanctioned the PEC (Proposal of Amendment to the Constitution) approved in Congress in June.

Even with the loss of steam, inflation is 3.67 percentage points above the inflation target of 3.5%.

The current level is also above the target ceiling of 5%.

If the year ends above this level, the president of the Central Bank, Roberto Campos Neto, will have to send a public letter explaining the reason for non-compliance.

According to the law that authorized the autonomy of the Central Bank, it is the central duty of the monetary authority to ensure the purchasing power of the population.

Campos Neto had already had to give explanations in 2021 when inflation reached 10.06%, and the target was 3.75%.

The BC president justified that oil and energy put pressure on the price index.

With information from Poder360