Brazil's central bank sees inflation still missing target in early 2028

SAO PAULO, Sept 25 (Reuters) -

Brazil's central bank projected on Thursday that inflation will hover near the official goal in the first quarter of 2028, but still fail to meet it, according to the bank's latest quarterly monetary policy report.

After

projecting

earlier this month annual inflation at 3.4% for the first quarter of 2027, the relevant horizon for policy decisions, policymakers unveiled a 3.1% forecast for the first quarter of 2028, the final period covered by the report.

The bank targets inflation at 3%, with a tolerance band of 1.5 percentage points in either direction.

Last week, the monetary institution kept interest rates at a near two-decade high of 15%, signaling a "new stage" of prolonged pause in its attempt to curb consumer prices.

The bank launched in September last year a cycle that lifted the benchmark Selic rate by 450 basis points.

Compared with June's report, the central bank lowered its 2025 inflation forecast by 0.1 percentage point to 4.8%, while the projection for 2026 was held at 3.6%.

"Among the factors that pushed inflation upwards, the dynamism of the labor market in a context of positive growth, and the increase in residential electricity projections stand out," the bank said in the report.

"Downward factors include the appreciation of the real and the reduction in inflation expectations."

The central bank also decreased its 2025 GDP growth forecast to 2.0% from 2.1% projected in June, citing an expected moderation in economic growth due to the recent tightening of monetary policy, as showed by some economic indicators.

Policymakers unveiled for the first time their projection for GDP expansion in 2026, seen at 1.5%. (Reporting by Fernando Cardoso; Editing by Aida Pelaez-Fernandez)