MNI BRIEF: 71% Chance of Exceeding 2025 Inflation Target - BCB

The Central Bank of Brazil sees a 71% chance that inflation will exceed the upper limit of its target tolerance range in 2025, according to its third quarter Monetary Policy Report released Thursday, up from 68% in the previous report.

The probability of exceeding the target stood at 26% for 2026 and 17% for 2027.

"There was a slight upward revision in the output-gap estimate for the second quarter compared with the 0.5% reported in the June 2025 Monetary Policy Report, due to stronger-than-expected labor market data," the document said. 

The goal is 3% with a tolerance range of 1.5 percentage points above or below. For the first quarter of 2027, now considered the relevant monetary policy horizon, the BCB forecasts inflation at 3.4%, unchanged from the June report. (See MNI BCB WATCH: Copom Reiterates Higher For Longer Strategy)

Market participants had been keen to see whether the central bank’s output gap projection had changed, given improved conditions, as its inflation forecast for the relevant horizon had remained unchanged.