Economic news

Brazil’s finance minister signals potential change to inflation target timeline

2023.05.19 01:48


© Reuters. FILE PHOTO: Brazil’s Finance Minister Fernando Haddad speaks during a news conference, at the Brazilian Embassy in Beijing, China April 14, 2023. REUTERS/Tingshu Wang/Pool/File Photo

BRASILIA (Reuters) – Brazil’s Finance Minister Fernando Haddad on Thursday suggested that the country’s new government is looking at adjusting the timeline for achieving its inflation target.

He said in an interview with CNN that he thinks it makes no sense to commit to achieving an inflation target by the end of each year, adding: “I think there is this improvement to be made, there is. And maybe the opportunity is now.”

Haddad reiterated he favors “a continuous inflation target” rather than a calendar year-based target, saying Brazil and Turkey were the only two countries to use the latter.

President Luiz Inacio Lula da Silva has advocated for higher inflation targets and a less stringent monetary policy.

The central bank currently targets inflation of 3.25% in 2023 and 3% in 2024 and 2025, with a tolerance margin of 1.5 percentage points up or down.

That compares with inflation of 4.18% in the 12 months through April and expectations by private economists for inflation to end this year at 6.03%.

The central bank has cautioned that discussions about higher targets might have contributed to an increase in inflation expectations, helping keep interest rates high.

The National Monetary Council, which comprises the finance minister, the planning minister and the central bank governor, is scheduled to convene in June to discuss inflation targets.

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