MNI BRIEF: BCB Set To Breach New Rule, Minutes Show
MNI (BRASILIA) - The Central Bank of Brazil is heading for a breach of its new policy framework in June, if its projections hold and12-month inflation exceeds the upper limit of the target tolerance range for six consecutive months, minutes from its meeting showed Tuesday.
"The short-term inflation scenario remains adverse. Food prices have risen significantly due to, among other factors, the drought observed throughout the year and the increase in beef prices, also affected by the cattle cycle," they said.
Under new rules which took effect Jan 1 the BCB must provide a justification when inflation remains above the 3% target’s tolerance range (1.5 percentage points) for six consecutive months.
Until 2024, a breach only came if inflation ended the year above the tolerance band. The BCB had to justify itself when 2024 inflation was 4.83%, exceeding the limit of 4.5%.
The BCB hiked its Selic rate by 100 basis points again to 13.25% last week, while signaling one more cut of the same size at the next meeting.