Brazil central bank chief predicts 6.5% inflation in 2022

Brazilian central bank chief Roberto Campos Neto on Tuesday predicted that inflation will reach 6.5% or a little lower this year, amid government measures that lowered taxes on key goods.

The estimate is more optimistic than private economists’ expectations of inflation at 6.82%, according to a central bank weekly survey, but still above the official target of 3.5%, plus or minus 1.5 percentage point.

“This year, inflation is going to be around 6.5%, perhaps a little bit lower. We are not celebrating that very intensively, we still think there is a very hard job to do,” said Campos Neto during an event hosted by Moneda Asset Management in Chile.

He stressed that cooling prices would benefit from lower taxes on key goods. As some government measures expire in December, Campos Neto said there will be “a payback” for inflation in 2023.

After decreasing in July, consumer prices reached 10.07% in 12 months in Brazil.

According to the central bank chief, the index should post two or three months of deflation, “very much” impacted by the tax measures and lower energy prices, while oil price relief has led to consecutive fuel cuts in the country.

The central bank has already hiked interest rates to 13.75% from a record low of 2% in March 2021, and has recently given signs that it will stop its monetary tightening, considered the world’s most aggressive, at its next rate-setting meeting in September.

Campos Neto said that core inflation has started to moderate, and policymakers foresee “administered prices going lower and food prices more or less stabilizing.”

Despite that, he highlighted policymakers are still waiting to have some degree of certainty that inflation is reaching an inflection point.