BRASILIA, June 25 - Brazil's central bank on Thursday released revised projections showing that inflation is expected to be close to the official 3.0% target by the end of 2028, even as forecasts for earlier periods were materially increased.
In its latest monetary policy report, the bank said annual inflation is projected at 3.1% in the fourth quarter of 2028, marginally above the 3.0% goal. The report left the remaining quarters of 2028 unchanged from the March outlook, with inflation seen at 3.2% in both the first and second quarters and at 3.1% in the third quarter.
Despite those late-2028 readings, the central bank raised its inflation estimates across all quarters of 2026 and 2027, reflecting what policymakers described as stronger-than-expected price pressures, a hotter economy and higher oil prices. The bank noted a sharp upward revision through 2027 - its current policy-relevant horizon - while maintaining the later-2028 path unchanged from the previous report.
Officials attributed the longer-term convergence toward the target in part to an expected normalization of food prices after increases linked to El Nino-related factors, and to a higher real interest-rate path than had been assumed earlier. At the same time, they signaled that near-term price momentum has strengthened.
The central bank also raised its GDP growth forecast for this year to 2.0%, up from 1.6% in the prior projection. Policymakers cited robust farming and commodities production and "fiscal and credit stimulus" as drivers of stronger activity, noting that these measures are being rolled out by President Luiz Inacio Lula da Silva to support demand ahead of his October re-election bid.
Markets were unsettled last week when the central bank cut its policy rate for the third consecutive meeting, trimming the Selic rate by 25 basis points to 14.25%. The institution left its future course open, even as it warned of a notable deterioration in the inflation outlook.
The report recalled that prior estimates had put fourth-quarter 2027 inflation at 3.7%, above the target for the bank's policy horizon at that time. The central bank acknowledged that policymakers had been focusing on inflation one quarter ahead - a stance that many economists judged to be a stretch in order to justify continued interest-rate reductions.
What the report shows
- Inflation expected at 3.1% in Q4 2028, with Q1 and Q2 at 3.2% and Q3 at 3.1% - unchanged from March for 2028.
- Significant upward revisions to inflation across 2026 and 2027 due to stronger price pressures, a hotter economy and higher oil prices.
- Annual growth forecast for the year raised to 2.0% from 1.6%, supported by farming, commodities and fiscal and credit stimulus.