Economic news

Expectations for Brazil’s long-term inflation to start easing -cenbank chief

2023.06.05 19:01


© Reuters. FILE PHOTO: Brazil’s Central Bank President Roberto Campos Neto attends a session of the Brazilian Senate in Brasilia, Brazil February 15, 2023. REUTERS/Adriano Machado

BRASILIA (Reuters) – Brazil’s central bank chief Roberto Campos Neto said on Monday that long-term inflation expectations, which have long concerned policymakers, would start to decline and pointed to a clearer economic environment.

“We still have a problem with long-term inflation expectations, which are high. We understand that they should start to fall too,” Campos Neto said at an event hosted by a regional coffee growers cooperative.

The central bank has kept Brazil’s Selic benchmark interest rate steady at a cycle-high of 13.75% since September, which has attracted frequent criticism from President Luiz Inacio Lula da Silva.

While the central bank has stressed the importance of persisting in the fight against inflation, citing concerns over increased inflation expectations deviating from official targets, Lula has deemed the policy approach unjustifiable as consumer prices have cooled.

Campos Neto, who has recently highlighted more favorable price trends in his speeches, said Brazil’s current inflation rates are significantly better than in rich nations.

“It’s because we have here an upward revision of growth, which is also very much led by agriculture … and at the same time, we have a downward revision of inflation while the world is going in the opposite direction,” he said.

Despite the slow improvement in inflation, Campos Neto said recent dynamics have been a little better, including core inflation and service inflation, two aspects the central bank monitors closely.

The central bank’s next rate-setting meeting is scheduled for June 20-21.

Brazilian inflation reached 4.07% in the 12 months to mid-May, with the inflation target set at 3.25% this year and 3.00% next year.

According to the central bank’s latest weekly survey of private economists, market expectations for inflation have dropped to 5.69% for this year and 4.12% for 2024.

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