Inflation can wait

BRAZIL ECONOMICS - Report 22 Jul 2026 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

We revisit the issue of the speed of inflation convergence to the target. We show that, even when the Central Bank’s inflation projections, based on the Selic rate path expected by market analysts, are above the target, the Copom very rarely makes a decision different from those anticipated in the FOCUS report, particularly by deciding on a Selic rate above expectations. Since the Central Bank uses the Focus path to build its projections and these projections remain above the target, we would expect it to choose a systematically higher Selic rate than that implied by Focus if it wanted timely convergence. Since this almost never occurs, there is revealed evidence that it accepts slower convergence. The result is greater inertia in inflation and inflation expectations, which makes monetary policy itself more difficult to execute.

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