First thoughts on Brazil’s new inflation target

The decision to lower Brazil’s inflation target from 4.5% currently to 4.25% in 2019 and 4.00% in 2020 is clearly a step in the right direction, but it’s worth bearing in mind that inflation targets are only as effective as the central bank’s will to meet them. In the case of Brazil, while inflation expectations have fallen over the past six months, the central bank’s failure to meet the inflation target in every year between 2010 and 2016 was a major contributory factor to the general upward trend in inflation expectations over the past five years.