The CMN (National Monetary Council) set this Thursday (24) the inflation target for 2024 at 3%, with a tolerance margin of 1.5 percentage points more or less.
The targets for 2022 and 2023 follow at 3.50% and 3.25%, respectively, with the same margin. For this year, the objective to be pursued is for an inflation of 3.75%.
The goal serves as an anchor for market agents’ expectations. The BC (Central Bank) guides its actions and manages the Selic rate with the objective of reaching the center of the target.
If this goal is not achieved and inflation ends the year above the maximum limit of the tolerance margin, the BC president is obliged to submit an open letter to the Minister of Economy to explain the reasons for non-compliance and the measures that should be taken for the return inflation to the established limits.
Since 2019, the target, measured by the IPCA (IBGE consumer price index), has been reduced by 0.25 percentage points per year.
As of the second half of last year, the IPCA rose significantly, driven, among other factors, by the increase in food prices. The movement extended into this year, with high prices for fuel and electricity.
The BC forecasts that inflation will reach 8.5% in the 12-month accumulated until August, according to a report released on Thursday. For the monetary authority, after that, the indicator would fall progressively until reaching 5.8% at the end of 2021, 0.55 percentage points above the target ceiling for the year.
The BC’s estimate is for a monthly increase of 0.62% in June, 0.39% in July and 0.26% in August, accumulating 1.28% in the quarter.
In May, the IPCA accumulated an increase of 8.06%, with an acceleration of 0.83% in the month, the highest for the period since 1996.
According to the document, the risk of the indicator breaking the ceiling rose to 74%. In the previous document, from March, the probability was 41%. The chance of falling below the target floor is zero, according to BC.
“The CMN assesses that setting the inflation target in 2024 at 3.00% reduces uncertainties and increases the planning capacity of families, companies and the government. The reduction of 0.25 percentage point compared to the 2023 target it is consistent with the high credibility of monetary policy,” the Ministry of Economy said in a statement.
“The expectation of future inflation, projected in the Focus Bulletin, proved to be anchored to the trajectory of reductions in the previous target, and the variance of inflation expectations has fallen substantially with the reductions in the target. Such evidence reveals that the monetary policy and the targets are credible, which eliminates the possible costs of reducing their percentages”, justified the folder.
The ministry stated that the process of fiscal consolidation of the economy creates a favorable environment for a structural reduction in inflation and interest rates.
“Measures such as the spending ceiling and the Social Security reform produced expectations of a reduction in the spending trajectory, while Constitutional Amendment 109/21 [PEC Emergencial] it established triggers for the adjustment of spending by the Union, States and municipalities and was added to the approval of other complementary laws that reinforce the fiscal balance of federal entities”, highlighted the note.
“Even in the face of adverse shocks, the government’s commitment to intertemporal fiscal balance, reflected in the maintenance of the ceiling, maintains a favorable environment for macroeconomic stability,” he continued.
The ministry also stressed that inflation brings substantial costs to society, “reducing real income from capital and labor, and, therefore, discouraging productive activity.”