Inflation target becomes continuous from 2025, decides CMN

The agency maintained the targets for 2024 and 2025 at 3%, with the same margin of tolerance. The CMN also announced the inflation target for 2026, which will be 3%, with a tolerance margin of plus or minus 1.5 percentage points. The difference is that, from 2025 onwards, the verification of compliance with the target will begin to take longer than one year.

For this year, the target was maintained at 3.25%, also with a tolerance of 1.5 percentage points. The inflation targeting regime has existed since 1999, with the CMN approving, each year, targets for the Extended National Consumer Price Index (IPCA) for the following years.

According to Haddad, the details will still be defined in a decree to be edited by President Luiz Inácio Lula da Silva. He, however, added that, in practice, the new system will verify compliance with the target in 24 months, with the horizon defined by the Central Bank.

Majority of votes

Formed by the finance ministers, Fernando Haddad; Planning, Simone Tebet; and by the president of the Central Bank, Roberto Campos Neto, the CMN meets every month. Decisions are usually consensual, but in case of disagreement, they are decided by majority vote.

According to Haddad, the continuous inflation target will only apply from 2025 onwards because that will be when BC president Roberto Campos Neto’s mandate ends. For the minister, the new model is important for the country because it will allow for a faster convergence of monetary (definition of interest rates) and fiscal (control of public spending) policies.

“Because of everything that is happening, as of August we are in a position to have a consistent cut in interest rates. Indicators are showing convergence. We have reason to be concerned about the slowdown (of the economy). We want to guarantee society a better 2024 than 2023. Practicing interest rates around 9% per year is something that should be reviewed by society, in light of the indicators”, declared Haddad.