Brazil's National Monetary Council (CMN), the country's top economic policy body, will meet on Thursday to set its 2026 inflation target, with all eyes on whether it will tweak the time frame now used to assess the goal's fulfillment.
Currently, the CMN sets annual inflation targets that must be met each calendar year. However, Finance Minister Fernando Haddad has said he favors pursuing inflation targets within a "continuous" time frame, arguing a longer-term approach provides more room to accommodate price shocks without requiring monetary tightening.
The CMN comprises the finance minister, planning minister and the central bank governor, giving the federal government two out of three votes on one of thorniest economic policy debates in Latin America's largest nation.
President Luiz Inacio Lula da Silva has often criticized the independent central bank for keeping interest rates at 13.75% despite a steep decline in inflation. He has also called for higher inflation targets to enable monetary policy easing. Those appeals, which he has not made for a few months, had served to worsen expectations for inflation.
Although the CMN is expected to maintain a 2026 inflation target of 3%, there is a growing belief it may ditch annual targets in favor of the longer-term models favored by Haddad.
The central bank currently targets inflation of 3.25% in 2023 and 3% in 2024 and 2025, with a tolerance margin of 1.5 percentage points up or down.
This compares with inflation of 3.4% in the 12 months through mid-June and private economists' expectations of inflation reaching 5.06% this year, 3.98% in 2024, 3.80% in 2025, and 3.72% in 2026.
