Brazil’s government narrowed the inflation target range for the first time since 2006 as policy makers try to restore confidence in their ability to contain consumer prices.
The inflation target for 2017 will be 4.5 percent with a tolerance range of 1.5 percentage points above or below that, Brazil’s monetary council decided Thursday evening. Brazil implemented the current target range of 2.5 percent to 6.5 percent in 2006.
Brazil has increased its benchmark interest rate at six consecutive meetings, making it the only Group of 20 nation to tighten monetary policy this year. Thursday’s decision to target a lower inflation rate underscores its commitment to contain consumer price increases, Roberto Padovani, chief economist at Sao Paulo-based brokerage Votorantim Ctvm Ltda, said by phone.
“They’re committed to show a more responsible policy from now on,” he said. “They’re trying to rebuild confidence and, as a consequence, bring back investment.”
Swap rates on the contract due in January 2017 rose six basis points, or 0.06 percentage point, to 14.12 percent as of 9:03 a.m. local time Friday, as traders bet on further increases to the benchmark rate.
The central bank forecasts inflation will end the year at 9 percent after accelerating to 8.8 percent in mid-June. Monetary policy needs to remain vigilant to bring price increases down to 4.5 percent by the end of 2016, the central bank’s economic policy Director Luiz Awazu Pereira told reporters on June 24.