UPDATE 2-Brazil keeps 2018 inflation target after considering cut

jueves 30 de junio de 2016 18:05 GYT
 

(Adds target decision, official comments)

By Alonso Soto

BRASILIA, June 30 (Reuters) - The Brazilian government on Thursday kept its inflation target unchanged at 4.5 percent for 2018 after policymakers considered cutting it to show greater commitment to lower inflation.

The National Monetary Council, the country's highest economic policy body formed by the central bank chief and the planning and finance ministers, decided unanimously to keep the target at 4.5 percent, one of the highest in Latin America. The council maintained its tolerance range for the target of plus or minus 1.5 percentage points.

A senior government official involved in the decision told Reuters earlier on Thursday that the government was considering a lower target, but there was no consensus in the economic team.

A lower target would have created pressure to keep interest rates high and encourage the appreciation of the Brazilian real , hurting exports at a time when the economy struggles with its worst recession in decades. The real has strengthened almost 30 percent from a record low reached in mid-January.

A drop in commodities prices and political upheaval that led to the suspension of President Dilma Rousseff in May dragged down the real, making Brazilian exports cheaper abroad and reducing its current account deficit.

Interim President Michel Temer, who as vice-president replaced Rousseff while she faces an impeachment trial, has vowed to revive an economy that has shed nearly two million jobs in over a year.

The finance ministry's economic policy secretary Carlos Hamilton Araujo said the council did not consider reducing the target because of the uncertainties in the economic outlook.

"Given the uncertainties in the economy, the council reached the conclusion that it was best to keep the target at 4.5 percent," Araujo said. (Additional reporting by Marcela Ayres; Editing by Chizu Nomiyama, Bernard Orr)