By Silvio Cascione
BRASILIA, March 30 (Reuters) - Brazil’s government could revise its inflation goal for 2018 depending on incoming data, Finance Minister Henrique Meirelles said on Thursday, as polls showed a strong market consensus in favor of a lower target for the long term.
Economists and investors increasingly have expected that the target would be lowered as inflation eased sharply in recent months, weighed down by Brazil’s worst recession on record.
“We will set the 2019 inflation target in June and will also review the 2018 goal to see if any changes could be justified,” Meirelles told journalists.
Economists have long bet on a lower target for 2019, but Meirelles’ remarks were the first sign that a reduction in the 2018 target is a possibility.
In June of 2016, Brazil’s top economic policy body set a 4.5 percent target for 2018, maintaining a decade-long goal despite calls for a cut. The target is higher than the 3 percent goal of other Latin American countries such as Mexico and Chile.
The so-called National Monetary Council, comprised of Meirelles and the heads of the central bank and Planning Ministry, is expected to set the 2019 target by the end of June.
Central bank director Carlos Viana, speaking at a separate event on Thursday, said there was a very small chance that the inflation target for 2018 would be lowered.
Economists have said that a stronger commitment to low inflation could boost Brazil’s long-term growth by reducing investors’ uncertainty. However, in the short term, it would limit the room for interest rate cuts and potentially hurt a tentative economic recovery.
Central bank chief Ilan Goldfajn has repeatedly stressed that there is yet no decision on the inflation target. Still, a Reuters poll in February showed 24 out of 28 economists from leading banks and consultancies expected the government to set a lower goal for 2019.
Brazil began targeting inflation in 1999. The current target was first adopted for 2005, originally with a tolerance margin of plus or minus 2.5 percentage points. In 2015, the government narrowed the range to plus or minus 1.5 percentage points.
Meirelles told reporters the government still expects the economy to grow in the first quarter, despite an unexpectedly steep contraction late last year. (Reporting by Silvio Cascione; Editing by Chizu Nomiyama and Paul Simao)