Text establishes non-compliance if inflation is outside the range for more than 6 consecutive months
The government published this Wednesday (June 26, 2024) the decree that establishes the continuous inflation target. There is no definition of percentages for the price index. The rate will be defined by the CMN (National Monetary Council), which will have a meeting this Wednesday (June 26).
The rate should remain at 3%, according to the Power360. This level began in 2024 and should be maintained until at least 2027. The decree was published this Wednesday (June 26, 2024) in the DOU (Official Gazette of the Union). Here’s the complete (PDF – 108 kB).
The price index currently used is the IPCA (Broad National Consumer Price Index), but the CMN may define another, according to the decree.
The continuous goal is established from January 1, 2025, when the president of the B.C. (Central Bank), Roberto Campos Neto, leaves the command of the monetary authority. It is up to the government to establish the inflation target, while the BC is responsible for defining the Selic rate to control the price index.
The goal will be “represented by cumulative variations in 12 months of widely publicized price index, calculated month by month”, according to the decree.
Now the target will be considered as “non-compliance” when the accumulated inflation over 12 months is outside the permitted range, either higher or lower, for 6 consecutive months.
The decree does not define the interval, which is the responsibility of the CMN. Currently, the limits are 1.5 percentage points down and up. In the case of the 3% target, the floor is 1.5% and the ceiling is 4.5%.
The decree establishes that the CMN may also change the target and interval. To do this, you will need a minimum advance notice of 36 months to start your application.
REPORT ON BC
The Central Bank will publish the Monetary Policy Report by the last day of each quarter, starting in 2025, to show the performance of the inflation target system, the results of past monetary policy decisions and the prospective assessment of inflation.
The Central Bank must publish a 2nd letter if inflation does not return to the target tolerance range within the period stipulated in the note and letter. The monetary authority may also publish another document if it deems it necessary “update the measures or the expected deadline for the return of inflation to the set target tolerance range”.
In practice, the BC already publishes a similar report, the Quarterly Inflation Report. This document will be extinguished and will give way to the Monetary Policy Report, which will add the obligations established in the decree. The BC’s disclosure system will be the same as that of the Quarterly Inflation Report, according to the Central Bank.
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