LatinNews Daily - 22 December 2020

In brief: Warnings of persistent inflationary pressures in Brazil

* Local economists have warned that while Brazil’s inflation rate is currently under control, the central bank (BCB) will have to take decisive measures in the first months of 2021 to contain it. The latest national consumers price index (IPCA) data showed that the annual inflation rate in November was 4.31%, just within the BCB’s target of 4% +/- 1.5. The BCB has set a target of 3.75% +/-1 for 2021, but economists say that to achieve this the BCB will have to adjust its current expansionary monetary policy. “Keeping inflation under control will require the BCB to remain vigilant with its monetary policy, particularly in the first months of the year”, commented Reginaldo Nogueira, a professor at the Faculdades Instituto Brasileiro de Mercado de Capitais (Ibmec) higher education institute. Nogueira explained that the inflation rate will not “naturally” fall to the BCB’s target in 2021, and that the BCB will likely have to increase the benchmark Selic interest rate, which is currently at a historic low of 2%, early in the new year to offset inflationary pressures. 

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