Brazilian President Luiz Inacio Lula da Silva signed a decree on Wednesday to establish a continuous inflation target starting in 2025, with the central bank providing quarterly accountability. The National Monetary Council (CMN) confirmed the official goal of 3%, with a tolerance range of plus or minus 1.5 percentage points.
The decision follows Lula’s previous criticism of the target, which he argued was too low and restrictive for the economy. The continuous target framework, announced in June 2023, aims to provide a longer-term approach, accommodating price shocks without immediate monetary tightening.
Finance Minister Fernando Haddad emphasized that the government’s decisions reflect Lula’s commitment to controlling inflation. The new system eliminates the need for annual target setting and establishes a new macroeconomic horizon for Brazil, according to Haddad.
Starting January, the target will be considered missed if annual inflation deviates from the tolerance range for six consecutive months, prompting the central bank to issue an open letter explaining the deviation and corrective measures.
The decree also mandates a quarterly monetary policy report from the central bank, detailing the new framework’s performance, past monetary policy results, and future inflation assessments. This change aims to anchor inflation expectations over longer horizons and demonstrate Brazil’s commitment to maintaining low and steady inflation.
Any changes to the target must now be announced at least 36 months in advance.
Tags: #BrazilEconomy #InflationTarget #MonetaryPolicy #LuizInacioLulaDaSilva #NationalMonetaryCouncil
