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Analysts cut inflation projections in Brazil until 2026

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Analysts cut inflation projections in Brazil until 2026

Brazil analysts lowered their inflation estimates from this year to 2026 after central bankers signaled a “clearer” outlook on consumer prices.

Annual inflation will end this year at 5.42%, down for the fourth week in a row and below the previous estimate of 5.69%, according to a weekly central bank survey of economists released Monday. Analysts also lowered their consumer price forecasts to 4.04% in 2024, 3.9% in 2025 and 3.88% in 2026.

Monetary policy makers head to their meeting of fixing rates next week with a “clearer” inflation outlook, according to the owner of the bank, Roberto Campos Neto. Annual inflation continued to fall within its tolerance range, to 3.94% in May, after core readings, which exclude energy and food prices, slowed. Traders widened their bets that an easing cycle would start in August, as most analysts estimate borrowing costs will fall to 12.5% ​​in December and 10% by the end of 2024.

Brazil to test four-day work week

However, estimates for consumer price increases remain above expectations. central bank targets of 3.25% for this year and 3% for 2024 and 2025. A 2026 target-setting meeting is scheduled for this month, and may be crucial in lowering analyst estimates, according to a research report from JPMorgan & Chase Co.

“A shift toward the midpoint of the goal could permanently unanchoring inflationary expectations, making structural disinflation difficult,” analysts led by Cassiana Fernández wrote in the report.

Bills in Congress

Congress began discussions on a tax reform, while the Senate is expected to vote on a bill to shore up public finances amid expectations by the government of President Luiz Inácio Lula da Silva that the proposals will help lower interest rates.

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Lula, who has publicly criticized the current monetary policy, nominated two directors to the central bank’s board who will appear at a Senate hearing this month.

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