Brazil’s central bank has expressed growing anxiety over market projections showing inflation drifting further away from its established target. Policymakers are particularly troubled by long-term forecasts for 2028, a period that would typically be expected to balance out from temporary economic disruptions.
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Speaking at a Santander event, Nilton David, the central bank’s director of monetary policy, underscored that the widening gap in far-off forecasts signals that market analysts are losing faith in the long-term convergence of prices toward the bank’s 3% target. Despite headline inflation sitting within the official tolerance band earlier in the week, external pressures—notably energy and fuel price shocks driven by intense geopolitical conflict in the Middle East—have pushed 12-month inflation up to 4.39%, casting a shadow over future stability.
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To combat this trend, David clarified that the central bank will keep monetary policy firmly in restrictive territory. The benchmark Selic rate, which currently stands at 14.50% after consecutive cautious cuts, will remain high until officials see undeniable proof that consumer prices are realigning with their baseline goals. The director pointed out that the restrictive stance is successfully cooling down the economy, which is no longer expanding above its sustainable capacity.
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In light of heightened global uncertainty, David reiterated that the bank will completely avoid giving explicit forward guidance on its next steps. Instead, the institution will maintain a flexible, highly deliberate, and data-dependent approach, prioritizing economic composure over hasty policy changes to ensure short-term volatility does not entrench itself as long-term inflation.