O Official Diary of the Union today (24) publishes a resolution by the National Monetary Council (CMN) that sets the inflation target for 2025 at 3%, with a tolerance of 1.5 percentage points up or down. The percentage was announced yesterday (23) by the Ministry of Economy.
Measured by the Broad National Consumer Price Index (IPCA), inflation in 2022 has 3.5% as the center of the target defined by the CMN. For 2023 and 2024, the targets are maintained at 3.25% and 3%, respectively, with the same tolerance interval.
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.
Historic
Until 2016, the inflation target was set two years in advance, but a decree published in the Official Gazette in June 2017 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 gap dropped to two points and remained that way in the following years, until it dropped to 1.5 points for 2017 and 2018, something that will be maintained now until 2025.
