The council's silence on the matter followed intense speculation in recent weeks that it could use its authority to establish or modify the central bank's inflation targets, which new President Luiz Inacio Lula da Silva has publicly criticized. Finance Minister Fernando Haddad had said on Tuesday that the CMN would not discuss changing inflation targets, during a week of easing tensions between leftist Lula, who took office last month, and the central bank.
The CMN is comprised of the finance minister, planning minister and the central bank governor, giving the federal government two of three votes. Earlier on Thursday, Lula said in a TV interview that he had no interest in quarreling with central bank governor Roberto Campos Neto, following remarks from the bank chief opposing changes to the target and accepting as normal the president's complaints about high borrowing costs. Since taking office in January, Lula has strongly criticized the country's benchmark interest rate, currently at a six-year high of 13.75%, as unjustifiable in light of cooling inflation.
Although consumer prices slowed to 5.77% in the 12 months to January, they remain far from the official target of 3.25% this year, with a margin of 1.5 percentage points on either side. The inflation target for 2024 and 2025 is 3%, with the same tolerance range, but analysts surveyed by the central bank last week forecast inflation of 4.0% and 3.6% in the next two years, respectively. When it kept its benchmark interest rate unchanged earlier this month, the central bank drew attention to inflation forecasts drifting away from longer-term targets amid fiscal concerns under Lula, signaling the need to maintain high interest rates for longer to re-anchor expectations.
Although many economists say that Lula's rhetoric has pushed
inflation expectations even further off target, others complain
that current targets are unfeasible and require major economic
sacrifices, an argument raised by some of Brazil's top hedge
fund managers at an event on Wednesday.
Typically, the CMN decides the annual inflation target three
years in advance at its June meeting, when it also reaffirms
previously established targets.
However, the council may review its targets at any time, and
the decision to put the topic on the agenda lies with the
Finance Ministry.
(Reporting by Marcela Ayres in Brasilia
Editing by Chris Reese and Matthew Lewis)
