Brazilian central bank chief Roberto Campos Neto said on Thursday he supports adoption of a continuous time frame for the monetary authority to pursue inflation targets, replacing the current system of tracking a calendar year.
Campos Neto, speaking in Brasilia, said that central bank studies carried out since 2017 showed the continuous target to be more effective in assessing the goal's fulfillment.
The decision comes as Brazil's National Monetary Council CMN, the country's top economic policy body, is scheduled to meet later on Thursday to set its inflation target for the country in 2026.
The CMN is expected to decide on a 3% target for 2026, the same as in the 2024 and 2025 periods, but markets are closely watching the meeting as there is a growing belief that the council may leave annual targets in favor of the longer-term models.
It's an improvement, although we still need to understand how that would be measured, Mr. Campos Neto said.
In the past, the government has taken measures aimed at aligning official inflation index to targets in a given calendar year, which was bad and implied less smooth monetary cycles.
The council's three members, including Finance Minister Fernando Haddad and Planning Minister Simone Tebet, are among the council's three members.
Haddad has publicly supported changing the time frame, arguing a longer-term approach provides more room to accommodate price shocks without requiring monetary tightening.
Campos Neto said policymakers do not think there was inconsistency between the statement and the minutes of their latest policy meeting.
He added that the declaration had already left the door open for monetary easing ahead.
The Central Bank held interest rates at a cycle-high of $13.75% for the seventh consecutive policy meeting last week.
While the Bank no longer mentioned the possibility of resuming hikes in its statement, policymakers stressed that future steps would be data-dependent, frustrating many who were expecting a clear signal for upcoming rate cuts given the more favorable inflation outlook.
The minutes also showed that most policymakers see the possibility of what they call a parsimonious rate cut at the next meeting in August as contingent upon a more benign inflation scenario.