The National Monetary Council (CMN) set the inflation target for 2025 at 3%, with a tolerance of 1.5 percentage points up or down. The announcement was made by the Ministry of Economy this Thursday (23).
Inflation targets for 2023 and 2024 were maintained at 3.25% and 3%, respectively, also with a tolerance range of 1.5 points up or down. This is the value that the Broad Consumer Price Index (IPCA) may reach in the coming years. In 2022, the inflation target also remains at 3.5%, with the same tolerance range of 1.5 points.
Historic
Until 2016, the inflation target was set two years in advance, but a decree published in the Official Diary of the Union in June 2017, it determined that the definition should be made three years earlier. According to the Central Bank (BC), the change aimed to reduce uncertainties and improve the planning capacity of families, companies and the government.
Since 2005, the center of the inflation target has been at 4.5%, with a 2.5-point margin of tolerance. In 2006, the range dropped to 2 points and remained so in the following years, until it was reduced to 1.5 points for 2017 and 2018, a band that will now be maintained until 2025.
The inflation target must be pursued by the BC when defining the basic interest rate, the Selic. When the Monetary Policy Committee (Copom) raises the Selic, it intends to contain heated demand and hold prices by making credit more expensive and encouraging savings. By lowering basic interest rates, the Copom makes credit cheaper, encouraging production and consumption.
