Brazil Central Bank Says 2027 Slowdown Needed to Hit 3% Inflation Target

Brazil's central bank considers a slowdown in economic activity next year essential for inflation to return to its 3% target, a senior official said on Thursday.

Speaking at a press conference, acting Economic Policy Director Paulo Picchetti said the output-gap opening built into the bank's 2027 forecast is necessary for prices to converge in its models. His comments followed the bank's earlier projection of just 1.4% gross domestic product growth in 2027, well below the 2.3% expansion forecast by the government.

Central bank governor Gabriel Galipolo, addressing the same event, said policymakers are approaching data with humility given an unusually high degree of uncertainty around the economic outlook. He warned against relying on a false sense of precision, including when judging whether the bank's forecast of 3.1% annual inflation from the second quarter of 2028 onward amounts to convergence with the 3% target.

"This is a central bank that does not overreact to data points to avoid creating unnecessary volatility," Galipolo said. He added, however, that signs of slowing economic activity have become increasingly evident.

On planned macroprudential measures, Galipolo said the bank aims to curb aggressive lending practices and address cases of predatory credit. He pointed to credit card delinquency standing at 65%, saying a product with such a high delinquency rate has a design flaw. He did not elaborate on the new rules.