Brazil has set its sights on inflation levels below 5% at least through 2020, central bank governor, Ilan Goldfajn, told reporters in Washington DC on Friday.
For 2019, the central bank expects inflation to hit 4.25%, before dipping to 4% in the following year, Goldfajn said at a conference hosted by the Brazilian-American Chamber of Commerce.
Last month, the bank revised inflation forecasts for 2017 and next year because the consumer price index, IPCA, was predicted to hit 3.2% this December and 4.3% by the end of 2018.
“We have probably reached the bottom for inflation,” Goldfajn said.
IPCA stood at 10.7% in January 2016 and declined to just 9% by August last year, three months after Goldfajn took over the reins at the central bank.
“We started to see disinflation in the last quarter of last year,” he said, adding that IPCA went from double digits to below 4% in less than six months.
“We are not going to allow inflation to go back to two digits,” he also said.
The 12-month IPCA slipped to 2.56% in September from 2.68% the previous month, numbers from Brazil’s statistics office IGBE showed.
Goldfajn also attributed lower consumer prices in Brazil to falling food costs.
Last month, Brazil’s central bank lowered its benchmark lending rate, or Selic, by 100bp to 8.25%, the eighth cut in a row.
The governor said more easing was on the way, but expects the size of the rate cuts to reduce, before gradually phasing it out.
“The next goal is stability,” Goldfajn said in regards to keeping interest rates down. “If we are able to do that, it will be a major change in the Brazilian economy.”
Pending social security reforms, meanwhile, are also expected to improve Brazil’s fiscal accounts and enable the central bank to enact measures to keep inflation and rates under control.
“We should take advantage of the opportunity now to do the reforms we need,” he said.