Unsurprisingly, the Central Bank kept its inflation projections unchanged for 2024, 2025 and 2026, currently at 3.5%, 3.2% and 3.2%, respectively, according to the Quarterly Inflation Report (RTI), released today.
In the document, the authority highlighted that there was inflation higher than the December RTI projections, but with a downward revision of short-term estimates, especially “of volatile items, which rose more than expected in recent months, and the increase in the price of oil”. “Our objective is to bring inflation to the target, which is defined by the government. The important thing is to bring this inflation to the target with the minimum cost to society: minimum unemployment and credit retraction”, said the president of the Central Bank, Roberto Campos Neto, during a press conference in São Paulo. Brazil is doing this, even if this last mile is a little more painful. We brought inflation to target at a very low cost.”
Compared to the December RTI, the probability of 2024 inflation exceeding the upper limit of the target fell from 24% to 19%, according to the BC. For 2025 and 2026, the monetary authority kept the probabilities of exceeding the target unchanged, at 17%.
In relation to economic growth, the BC revised the expansion of the Gross Domestic Product (GDP) this year from 1.7% to 1.9%, mainly reflecting “the slightly greater than expected dynamism of the economy at the beginning of the year, as suggested the available indicators”.
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From a supply perspective, the BC continues, growth should rely on less contribution from less cyclical sectors, such as agriculture and extractive industries. On the demand side, the authority foresees lower growth in family consumption, given the smaller amount of government resource transfers.
“The report had the same wording as the last Copom minutes [Comitê de Política Monetária do BC]reinforcing the increase in uncertainty and the need for more flexibility in the conduct of monetary policy”, highlights, in a note sent to clients, economist Caio Megale, from XP, for whom GDP should grow 2% this year.
