Brazil’s inflation expectations have been on the rise, with short-term expectations increasing while long-term projections remain above the 3 percent target. Goldman Sachs’s economist, Alberto Ramos, analyzed the latest Focus Report released by the Central Bank, which revealed inflation expectations for 2024 and 2025 to be 4 percent and 3.87 percent, respectively. The market perceives that fiscal targets may not be met, leading to an acceptance of higher inflation levels.
The Central Bank’s Monetary Policy Committee has revised inflation projections above the target rate, reflecting concerns about unanchored expectations. President Lula’s administration faces criticism for its fiscal management and lack of commitment to spending cuts. The uncertain external scenario and strong local economic indicators have kept the benchmark interest rate at 10.5 percent.
Analysts suggest that any improvement in fiscal commitment could lead to changes in interest rate projections. The Focus Report’s median projections expect rates to remain steady for the coming years, pending government actions.